Our opinion on the current state of LIFEHC(LHC)
Life Healthcare (LHC) is the second-largest healthcare company listed on the JSE main board, operating private hospitals, same-day clinics, surgeries, and healthcare companies in South Africa, the UK (Alliance Medical), and Western Europe. The outgoing CEO, Shrey Viranna, has indicated that the group is shifting its focus from conventional hospitals to day clinics and non-acute services. Additionally, there is an effort to diversify from reliance on medical aid schemes towards serving individuals who pay for medical services out of pocket. This is exemplified by the launch of MyLife Clinic, which offers consultations and basic medication for R300.
In its annual results for the year ending 30th September 2023, Life Healthcare reported a revenue increase of 10.3% but a decrease in headline earnings per share (HEPS) by 16.9%. The company attributed this performance to "The Group's SA operations [which] experienced strong demand for their services in the current year driven by the Group being the preferred network provider for medical aids. This led to higher utilisation of the Group's hospitals and complementary services which delivered PPD growth of 9.5%."
For the six months ending 31st March 2024, a trading statement projected that earnings per share would increase by more than 20%, a boost largely due to the disposal of Alliance Medical Group. However, this disposal would not impact HEPS. The subsequent results for this period reflected a revenue increase of 7.8% and a 2.3% rise in paid patient days (PPD) in the acute section. HEPS from continuing operations saw a significant increase of 29.9%. The company noted, "The Group is in a net cash position as at 31 March 2024 due to the proceeds received from the sale of AMG. The Group remains in a strong financial position with net debt to normalized EBITDA (as per bank covenant definitions) of 0.8 times after the payment of the special dividend on 8 April 2024."
Technically, Life Healthcare’s shares peaked at R47 in September 2014 but have since been in a long downward trend. Currently trading around 1130c, the shares have a P/E ratio of 13.85, reflecting the company's expectation of improved results, its defensive nature, and its overseas diversification, which offers some rand-hedge characteristics.
Given these factors, Life Healthcare shares appear to offer reasonable value, particularly now that the company has resumed paying dividends. This positions the shares as a potentially attractive option for investors looking for exposure in the healthcare sector with a blend of local and international operations.
In its annual results for the year ending 30th September 2023, Life Healthcare reported a revenue increase of 10.3% but a decrease in headline earnings per share (HEPS) by 16.9%. The company attributed this performance to "The Group's SA operations [which] experienced strong demand for their services in the current year driven by the Group being the preferred network provider for medical aids. This led to higher utilisation of the Group's hospitals and complementary services which delivered PPD growth of 9.5%."
For the six months ending 31st March 2024, a trading statement projected that earnings per share would increase by more than 20%, a boost largely due to the disposal of Alliance Medical Group. However, this disposal would not impact HEPS. The subsequent results for this period reflected a revenue increase of 7.8% and a 2.3% rise in paid patient days (PPD) in the acute section. HEPS from continuing operations saw a significant increase of 29.9%. The company noted, "The Group is in a net cash position as at 31 March 2024 due to the proceeds received from the sale of AMG. The Group remains in a strong financial position with net debt to normalized EBITDA (as per bank covenant definitions) of 0.8 times after the payment of the special dividend on 8 April 2024."
Technically, Life Healthcare’s shares peaked at R47 in September 2014 but have since been in a long downward trend. Currently trading around 1130c, the shares have a P/E ratio of 13.85, reflecting the company's expectation of improved results, its defensive nature, and its overseas diversification, which offers some rand-hedge characteristics.
Given these factors, Life Healthcare shares appear to offer reasonable value, particularly now that the company has resumed paying dividends. This positions the shares as a potentially attractive option for investors looking for exposure in the healthcare sector with a blend of local and international operations.
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