GEM Healthcare - values after EM sell-off

GEM healthcare valuation update

The GEM medical service providers have weakened over the past week on the back broader EM currency sell off and stronger dollar. The Turkish healthcare sector in particular has come under selling pressure. The shares of IHH Berhad with nearly one-third of its revenues generated in Turkey through Acibadem Holdings were among the worst hit.

The markets remain volatile and there is significant contagion risk. With its gearing and large Euro exposure, MLP Saglik (MPARK TI) could remain under pressure until EM currencies settle, which could take months. Here, we compare and contrast valuation metrics of companies operating in GEM medical services space. The list includes IHH Berhad, Mediclinic International, Life Healthcare, MLP, Acibadem, Lokman, NMC, and Spire. We include Spire because of continued EM strategic interest in the company. Acibadem (IHH's Turkey business) multiples are as implied by IHH Berhad's group valuation adjusted for EBITDA margin difference between the Group and Acibadem itself.

Investor multiples

 1. EV/Sales        
                           2016    2017    2018E
Acibadem             2.0       1.7         1.5
MLP                       1.8       1.5         1.4
IHH                        5.1       4.2        3.5
Life                       2.5        2.1         1.8
Lokman                0.9       0.8        0.7
Mediclinic             3.2       2.5        2.0
NMC                     11.7       9.3        7.4
Spire                     1.4        1.3         1.1
Average               3.6        2.9       2.4
 

2. EV/EBITDA

                           2016    2017    2018E
Acibadem            11.5      9.8        8.5
MLP                     10.7     10.3      10.4
IHH                      22.5     16.1       12.8
Life                        9.7      8.8       6.9
Lokman                 6.0      7.0       5.2
Mediclinic             17.6     13.5      9.9
NMC                    68.6     51.5     38.8
Spire                     7.7       9.0       7.8
Average               19.3      15.7     12.5
 

3. P/E

                           2016      2017     2018E
Acibadem            33.7      29.5      25.5
MLP                    -59.4     -21.8     -36.6
IHH                       73.2     32.4       25.5
Life                       17.2      34.0       15.5
Lokman                16.4       17.9        7.1
Mediclinic            28.8      22.2       16.5
NMC                     92.9     70.9      55.4
Spire                     10.7      27.6      23.8
Average                26.7     26.6      16.6