LONG: NETCARE in South Africa (JSE)

20 sty 2020

NTC

WHO IS NETCARE?

Netcare Ltd. is an investment holding company which operates through a number of subsidiaries in the health care and health services industry in South Africa. The company has over 25 000 employees and holds the highest market share in regards to private health care in South Africa.

THE SITUATION

The public health care system in South Africa is frail and deteriorating. Public hospitals are ineffective in regards to serving the country's growing population (1.8% growth per year), further more the quality of public health care causes much complaining in the public and is one of the core failings of the public health system. Citizens who can afford medical aid and medical insurance always prefer using private health care.

In the last 3 years the uptake of medical insurance has grown as low cost medical insurers enter the market and make medical insurance more accessible for people to use and thus opt to use private health care. The demand for private health in the long term is set to rise.

THE OPPORTUNITY

In the private health care system there are mainly three big companies in South Africa, these are
1. Medi Clinic, Netcare and Life.

Netcare is positioned to be the biggest beneficiary of the demand for private health care as the group has the most foot print and a variety of specialists in its group, further more the group recently acquired Akeso which is a mental health group of clinics. Mental health is set for a boom in South Africa as the stigma decreases and more medical insurers and medical aid recognize illnesses and serve them.

The biggest risk to Netcare and health care companies in South Africa is NHI, a messy implementation of NHI could result in private health care providers suffering from state maladministration and the mass regulation of fees.

SCENARIO PREDICTION

Private health care and private mental health care demand will increases, Netcare will gain more customers and earnings will increase in most of their facilities. Management will handles the balance sheet well as they have done in the past and shareholders will be rewarded with an increase in dividends.
The share price will increase from R20.78 to R38.00 in the next 4 years (by 2024)

24 mar 2020

Zlecenie aktywne

Since the last time I posted this idea Netcare has dropped to R12 a share. This has been due to the economic crisis that is unfolding in South Africa due to the reaction of governments to the Corona Virus spreading. This is now an even better time to buy the stock. But be warned, there are turbulent times ahead so only buy the stock if you intend on holding it for at least 3 years while the economy recovers and the market normalizes.