Expensive markets and slower economic growth make the current investment landscape challenging. To ensure an acceptable investment outcome in this environment, income specialist Marriott believes that one should be looking for equities that have the ability to grow its earnings/dividends.
An industry that can do this is the healthcare industry. Life Healthcare is Marriott’s preferred hospital group. It has operated hospitals for over 25 years and has grown into one of the leading healthcare providers in South Africa. Although it has expanded its operations into Poland and India, the majority of its earnings are derived from within SA.
The South African healthcare market’s f undamentals are looking strong from a volume, pricing and margins perspective as described below.
The number of people usi ng healthcare benef its is expected to increase in the years ahead for the following reasons: AN I NCREASING NUMBER OF PEOPLE TO BE COVERED BY MEDICAL AID SCHEMES: This is an important aspect for private hospital groups as approximately 90% of t heir revenue is derived f rom medical a i d patients. SA has approx i mately 9m (17 % of t he population) people on medical aid and we have seen growth in these numbers more r ecently as a r esult of t he establishment of t he Government Employee Medical Scheme. The table below shows a growing number medical aid beneficiaries going back to 2003. HIGH DISEASE BURDEN: SA has a high disease burden relative to other countries, which ultimately results in a
higher demand for healthcare.