Our opinion on the current state of NETCARE(NTC)

The Netcare Group (NTC) operates healthcare facilities across South Africa and Lesotho. With 59 hospitals (including four public-private partnerships), it employs approximately 22,000 staff and manages 10,600 beds. Additionally, Netcare 911, its emergency response unit, operates from 79 locations with over 1,000 paramedics. While healthcare typically remains stable regardless of economic downturns due to unavoidable medical expenses, Netcare faces challenges stemming from the competitive medical aid sector, which often demands lower prices.

On March 23, 2021, Netcare received notice from the Lesotho government terminating its contract to manage Queen Mamohato Hospital in Maseru following a wildcat strike by nurses. Most Netcare hospitals are equipped with full island capacity, enabling them to operate independently of the electrical grid. They also have uninterrupted power supply (UPS) systems and over 200 backup diesel generators.

In its financial results for the year ending September 30, 2023, Netcare reported a 9.5% increase in revenue and a 36.5% rise in headline earnings per share (HEPS). Total paid patient days (PPDs), including acute and mental health care, grew by 6.7%, with average occupancy rising to 64.4%.

An operational update covering the five months ending February 29, 2024, indicated that total PPDs increased by 0.3% compared to the previous period. Acute patient day activity remained above 94% of pre-pandemic levels, and the average acute occupancy reached 69.4% in February 2024, the highest since February 2020. Revenue per PPD increased by 6.2% in the first quarter of the fiscal year, while mental health services reported an 82.4% occupancy rate in February.

A voluntary update for the six months ending March 31, 2024, revealed a 4.2-4.4% increase in revenue. However, PPDs declined by 0.8% compared to the prior period but increased by 0.4% in the subsequent seven months up to April.

Technically, Netcare's share price has been declining since its peak at R43 in March 2015. After bottoming out at around R12 in March 2020, the share has mostly traded sideways, hitting a new low of 1,104c on May 2, 2024. It remains vulnerable, trading at a P/E ratio of 11.29, and could decline further unless it breaks above the 1,713c resistance level.