Medical Park:  Unwarranted discount to peers

06:0631 December 2018
Medical Park:  Unwarranted discount to peers

OYAK Securities Research  initiated coverage of  Medical Park Hospital Chain (MLP Care), the leading private healthcare provider in Turkey, with an Outperform rating. Its  12 month  Target Price of TL18.30/s indicates an attractive 60% upside potential. “Operating in a defensive healthcare industry with a strong presence nationwide, we believe MPARK trades at an unwarranted 37% discount to its peers with 6.9x EV/EBITDA on our 2019 estimates. We believe strong 4Q18 financials ahead, improving FCF generation and on-going deleveraging would act as a catalyst for repricing in the stock, in the upcoming period”, wrote analyst Ms. Gulce Deniz.


MLP Care at a Glance

Shareholder Structure

 Being the largest private healthcare provider in Turkey with 5,879 bed capacity (11% share in private beds), MLP Care has a strong presence nationwide

 MLP Care operates under three different concepts (Medical Park, VM Medical Park and Liv Hospitals), targeting different income groups. This positioning offers a well-diversified revenue base that supports the growth

 Medical tourism is an important growth area for the Group thanks to strong position in Turkey in medical tourism and MLP Care’s strong presence with its JCI accredited hospitals

 Affiliation with universities offers an ability to attract most skilled and experienced academicians to serve in MLP Care hospitals

EBITDA to post 22% CAGR in the next two years

We forecast MLP Care’s revenues to grow by an average of 15% per annum in the next two years, while EBITDA is expected to increase at 22% CAGR in the same period, reaching TL648mn by 2020 amid

  1. focus to increase utilization in developing hospitals and ii) higher pricing as the Company benefits from inflationary environment considering defensive nature of healthcare industry and well-diversified revenue base adding to growth. Besides
  2. increasing contribution from medical tourism and university hospitals as well as the
  • strict cost management are further supportive.


We project the Company’s EBITDA margin to reach 16% by 2020 with utilization increasing to 71% in MLP Care’s hospitals (vs. 65% in 9M18).


Substantial fall in FX denominated debt to increase earnings visibility

Improving EBITDA generation is expected to yield further ease in the Company’s net debt to EBITDA to 0.5x by 2020YE, without any greenfield investment or acquisition. We project FCF yield to hover around 20% in the next two years. Ongoing deleveraging and lower FX exposure following the hedging transactions since Jul’18 that brought down the share of Euro denominated debt to 26% of total is likely to pave a way for higher visibility on the bottom-line and possible dividend payment starting from 2020.


4Q18 should yield solid EBITDA performance

In 4Q18, i) full quarter impact of SUT price amendments made in July, 2018, ii) ramp-up of recently added Pendik and Mersin hospitals, iii) full conversion of FX denominated building rent expenses into TL as of Oct’18, iv) improving contribution from ancillary business and  medical tourism are expected to make positive  contribution to the profitability, in our view. EBITDA margin is projected to improve by 230 bps y/y to 15.5%, carrying EBITDA to TL135mn, up 46% y/y. Apart from the solid operational profitability, bottom-line is likely to benefit from reversion of the some of the FX losses recorded in 3Q18, given stronger TL.

Modified Time: 06:0631 December 2018
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