Mediclinic slips after outlook warning

Private hospital group Mediclinic’s share price fell 4.28% to close at R116.20after a Londonbased investment bank warned the group may report disappointing half-year results.

With a market capitalisation of about R89bn, Mediclinic has hospitals in Namibia, SA, the UK and the United Arab Emirates.

Jefferies downgraded the outlook for Mediclinic International saying the private hospital and clinic operator was likely to give a disappointing trading statement in October.

“The brokerage keeps its underperform rating on the stock,” Jefferies said in a note.

However, it cut its long-term earnings per share forecast by up to 10%, while it reduced its price target to 550p, from 650p.

Subsequently, the share plummeted 5.14% on the London exchange on Monday.

However, local fund managers attributed the drop to various factors including a warning from rival Life Healthcare that it expected negative volumes. Life Healthcare operates in SA, the UK, India and Europe and has a R34bn market capitalisation.

Mediclinic indicated in its preresults conference call update last week that volumes were still negative in this country, ranging from -1.7% to -2% year on year.

Mvunonala fund manager Matthew Zunckel said this was a fairly negative read-through for Mediclinic, as it indicated that active case management was still an issue and occupancies were likely to be under pressure for all hospital groups in SA.

Reuben Beelders, an asset manager at Gryphon Asset Management, said he had increasingly observed that some sell-side brokers were more positive on hospital services competitor Life Healthcare.

“Often, there are pair trades in the market, so when one hospital group finds favour among investors, they could ‘fund’ the purchase by selling a ‘less attractive’ investment,” he said.

Life Healthcare closed relatively unchanged, 0.34% lower at R23.72.