JEDDAH: Despite high growth potential of the Saudi healthcare sector, economists predict more downside risks following a recent rally in the market driven by the government’s measure to ease concerns on the liquidity front.
The recent rally for the sector and the overall market was a result of the government’s announcement to clear dues of around SR100 billion.
“While the rally was justified for the banking sector and related sectors, health care being more defensive had less basis for the rally,” analysts at Al-Rajhi Capital noted.
“As a result of the ensuing optimism and high outstanding receivables for some companies in the sector, healthcare stocks also rallied. Post the rally, all of the companies now have an upside potential of less than 10 percent and therefore we revert to Neutral rating on all health care companies.”
Share prices of Dallah and Mouwasat have already surged significantly despite no company specific triggers or broader market implications of easing liquidity (such as declining SAIBOR etc.) or no prior increase in receivables and therefore have more downside risks. On the other hand, Al-Rajhi analysts noted, if Q4 results do not indicate an improvement in receivables for NMCC and Hammadi, we are likely to see downside risks for them as well. “In 2017, we expect tougher pricing negotiations by domestic private firms (to save on costs) with medical insurance companies leading to possibly limited increase in prices for healthcare services,” they said. Key upside risk is from a sharp improvement in receivables in Q4. Overall the revised target prices are: Dallah (SR90), Mouwasat (SR142), National Medical Care Co. (SR68), and Hammadi (SR40).
Analysts see downside risks for healthcare sector
