Increasing strength to expand into new areas
AfroCentric Investment Corp shot the lights out in the six months to December following a subdued period when it was investing heavily in expanding its underlying businesses. The most heartening aspect of the interim performance was that the JSE-listed health-care holding company, which is black owned, is now starting to generate revenues that will assist it in its ambitions to grow in SA and the rest of Africa.
AfroCentric, which is a much overlooked mid-cap counter, owns, Medscheme, whose customers include the Government Employees Medical Scheme (Gems) and the Fedhealth and Bonitas schemes. The group is also on a trajectory to acquire new and existing health-care businesses to increase its participation in the health-care sector.
It is in discussion with potential partners in East and West Africa to expand its footprint in those regions.
But it is not aggressively targeting international expansion at all costs, preferring to remain receptive to opportunities outside the SA market.
The key question remains the condition of SA medical schemes and the opportunities this oft-maligned sector holds.
According to AfroCentric, rising costs in SA have made
smaller medical schemes unviable — especially if they are failing to attract younger members. This has made medical scheme mergers more likely, and AfroCentric is positioned to capitalise on scheme consolidation. Its target for this year is an increase of 120,000 lives under administration.
Part of the new membership may arise from the relationship AfroCentric has with government via Gems and the police service’s Polmed.
AfroCentric delivers chronic medication to 180,000 patients in National Health Insurance (NHI) pilot districts through its subsidiary, Pharmacy Direct.
It is negotiating with government around a number of tenders, and considers government to be a key client and partner to its business.
Additionally, AfroCentric aims to extract value from revenue diversification, acquisitions and strategic transactions.
It will pay more attention to inorganic growth, including public sector involvement, in the next three to five years.
The focus will increasingly be on niche markets.
It is still early in Afrocentric’s development phase. However, the company seems to be on the right track to achieve its strategic goals and — perhaps more importantly — has the balance sheet to fund such strategic moves.
As at the end of December 2016, cash and cash equivalents stood at R373m. Addition- ally, the company has experienced good profit growth, managing to post a 46% surge to R220m in pre-tax profits in the half-year to December 2016. Market watchers regard this as a good result.
The numbers are all the more exhilarating given that they include the results of assets belonging to venture capitalist Wad, which AfroCentric acquired in 2014 These assets were hitched to its wholly-owned subsidiary Act Healthcare after being acquired in a R400m cash deal. The Wad transaction has contributed more than 25% to the growth in the company’s operating profits, says chief financial officer Hannes Boonzaaier.
Arguably, AfroCentric is showing all the signs of progress in a company that has vowed to become a stalwart.
Its position as an integrated business in the sector offers opportunities to expand into new areas of health-care management — including niches in the pharmacy sector and ICT solutions for health.
The company also holds a top market position in managed care and has industry-leading expertise. It has a long track record as a medical scheme administrator.
For investors who have an interest in BEE companies and businesses that increase revenue with acquisitions, prescribes a large dose of AfroCentric scrip.