A Quick Update On Two Large-Cap Companies: NMC Healthcare Plc and Rightmove Plc

A Quick Update on Two Large-Cap Companies: NMC Healthcare Plc and Rightmove Plc

NMC Health Plc

NMC Health Plc (LSE: NMC) is the most significant healthcare company in the Gulf Cooperation Council (GCC) and listed on the main market of the London Stock Exchange. The healthcare group has an international network of healthcare facilities across 19 countries. NMC Health Plc is also one of the major players in the global markets of In-Vitro Fertilisation (IVF) and through its subsidiary ProVita, is regarded as one of the major providers of long-term medical care in the UAE. Comprising a global footprint following aggressive expansion programs post 2016, the group has a total capacity of 3,109 beds across 19 countries, and around 48% of the group’s total capacity now is in Kingdom of Saudi Arabia (KSA). The group has treated over more than 7.5mn patients till the end of 2018. It is also a major supplier of healthcare equipment, products and consumables across several core market segments, with a significant share of revenues coming from the healthcare-related products. On April-05-2014, NMC Group Plc shares got listed on the main market of the London Stock Exchange for trading, it is a constituent of the broader index FTSE 100.

In a recent exchange filing by the company as on August 08, 2019, the company released one statement on the recent fall in its stock price. It commented that post a decent performance in the H1FY19, performance parameters are broadly in line with the management expectations on all major metrics, including revenue, EBITDA, Net Income, Leverage, cash flow conversion and working capital. Also, it added that full-year guidance remains unchanged as reported earlier.

The company is all set to report its interim financial results for the first half ended June 30, 2019, on August 22, 2019.

 

Is rising borrowings dragging NMC Health Plc share price down?

Over the past three years, borrowings have risen substantially with a compounded average growth rate (CAGR) of 44%, from $483.72mn at the end of FY15 to $1,446.84mn in FY18. However, on a YoY basis, borrowing has risen from $987.84m in FY17 to $1446.94m at the end of 2018 and surged by 46%, which was substantial. At the end of 2018, the group had 2,250 convertible bonds units in issue; bonds in issue carries an interest rate of 1.875%/p.a., payable half-yearly in arrears on April 30 and October 31. Also, on November 21, 2018, the company issued US$400,000,000 Sukuk certificate, an Islamic finance instrument, with maturity for payment in 2023 and carrying a profit-rate of 5.950%/p.a., payable half-yearly in arrears on May 21, and November 21 respectively.

Long-term liabilities of the group in the FY18 rose to $1.5mn from $1.09mn recorded in the year-ago period and surged by 42.2% on a YoY basis, and this could be one of the major developments pulling down its share price.

Stock Performance NMC Health Plc

Daily price chart (as on August 12, 2019), before the market close. (Source: Thomson Reuters)

Share of the LSE: Share of NMC have tumbled more than 50% over a year with more than 24% decline recorded in the past three months and 15.7% in the past five trading sessions. Also, it was quoting considerably below the 5-day, 30-day, 60-day and 200-day simple moving average prices, which are bearish technical signals for a stock. Also, the 30-day, 14-day and 9-day Relative Strength Index (RSI) were oscillating near the oversold zone and indicating further downside as well. At the time of writing- before the market close at 10:01 AM GMT, shares of NMC were quoting at GBX 1,990.0, 33 points or approximately 1.6% lower in day’s session. In the past 52 weeks, its shares have registered a high of GBX 4,376 on August-20-2018, and a low of GBX 1,915.50 on August 07, 2019.

The outstanding market-capitalisation of the company stood at £4.02bn, which ranks it among the large-cap companies listed on the main market of the London Stock Exchange with a dividend yield of 0.86%. At the current trading level, the LTM PE of the company stood at 20.66x, whereas industry average LTM PE stood at 41.71x, which indicates that shares of NMC Group Plc are trading at a steep discount in comparison to their peer group companies.

Rightmove Plc

London Stock Exchange-listed Rightmove Plc (LSE: RMV) runs a property portal. Its areas of operations are divided into segments like Agency Branches, New Homes and Others. On March-15-2006, shares of the company got listed on the main market of the London Stock Exchange (LSE). Kayne Anderson Rudnick Investment Management LLC, Marathon Asset Management LLP and Baillie Gifford & Co. are the major institutional investors in the company. (Source: TR)

Recently in an exchange filing made by the company on July 26, 2019, the group notified that it had secured 100% stake in the Van Mildert. The acquired business is engaged in providing referencing services and guarantee insurance products, and it is well-positioned with a strong brand in the rental arena. The transaction was exercised for a total consideration of £16mn with deferred payment for two years starting from January 2020 and ending on December 2021, based on the top-line performance of the business, capped at £4mn.

Interim Results

As on July 26, 2019, the company reported its financial results for the half-year ended on June 30, 2019. Led by continued growth in the Agency and New Homes Businesses, the company’s revenue recorded an increase of 10% to £143.9mn and operating profit surged from £98.2mn in H1FY18 to £108.2mn in H1FY19. This was primarily supported by £90 growth in the average revenue per advertiser (ARPA) to £1,077 from £987 recorded in the year-ago period. On account of decent performance recorded by the group during the period under consideration, underlying basic earnings per share and earning per share both surged by 12% on a YoY basis, as compared to same period last year. Interim dividend declared in the first half of FY19 was of 2.8 pence per share, up by 12% on a YoY basis from 2.5 pence per share in FY18.

Peter Brooks-Johnson| Chief Executive Officer | Rightmove Plc

In the interim results statement, the company’s CEO said, “In the first half of 2019, the home hunters visited Rightmove’s portal 845 mn times.” However, the company witnessed a 4.6 per cent decline in transactions against a similar period in 2018, which has created pressures on some low-stock agency branches and provided opportunities for others. Peter Brooks-Johnson further added that the company is welcoming Van Mildert to Rightmove family.

However, despite decent growth recorded by the company in the past couple of periods, outlook seems to be a bit challenging in the wake of Brexit-related uncertainties in the UK. The company recorded gain on account of the increased ARPA to the tune of £90 which was offset by a 3% slump in the Agency businesses. Ongoing uncertainties related to the Brexit, which is creating hesitancy among the buyers and sellers, has led to stretched transaction times with consequent cash flow issues for low stock sale branches is coupled with the execution of ban on the tenant fee continuing to affect low stock rental branches. This condition is going to prevail in times ahead too, as chances of a no-deal Brexit have heightened post Theresa May’s resignation.

Stock Performance of Rightmove Plc

Daily price chart (as on August 12, 2019), before the market close. (Source: Thomson Reuters)

The RMV stock has delivered approximately 20.09% return on a YTD basis and is up by more than 5% in on YoY basis. The outstanding market capitalisation of the company stood at £4.06bn, which ranks it among the large-cap companies listed on the main market of the London Stock Exchange. While writing (before the market close, at 12:01 PM GMT), shares of the company were trading at GBX 518.0 and declined 0.2% in day’s session. In the last 52 weeks, shares have registered a high of GBX 588.10 and a low of GBX 415.20 respectively. At the current level, shares were quoting approximately 12% below its 52-week high price level and 24.7% above its 52-week low price level respectively. Also, at the current market price, the shares were trading below its 30-day and 60-day simple moving average prices, which indicates a short-term downtrend in the stock price. However, at the current trading level, the stock was trading above its long-term support level (200-day SMA).

At the current trading level, the LTM PE of the stock stood at 27.61x, and in the last 52-week period, it has touched high PE of 32.86x and a low PE of 25.10x respectively. However, Industry average LTM PE stood at 10.03x, which indicates that shares of Rightmove Plc were trading at a considerable premium in comparison to its industry peers.

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