We initiate coverage of South Africa’s healthcare services sector, with a focus on the three listed hospital groups: Life Healthcare (LHC), Mediclinic (MEI) and Netcare (NTC).
We find that the Southern Africa operations are strong operating profit and earnings contributors for the hospital groups. However, medical funders’ efforts to tighten tariffs through designated networks and moving certain procedures to day-hospital, have challenged acute hospital occupancies. The hospital groups have thus diversified their healthcare offering to include day-clinics, mental health facilities and acute-rehabilitation facilities, which has supported the groups’ revenue growth.