Our opinion on the current state of NTC

The Netcare Group, identified by its ticker NTC, is a prominent player in the healthcare sector, operating an extensive network of hospitals and medical response teams throughout South Africa and Lesotho. The group boasts fifty-nine hospitals, including four public/private partnerships, employs 22,000 people in South Africa, and offers 10,600 beds. Netcare 911, the group's emergency response division, operates from seventy-nine sites with over 1,000 paramedics, showcasing the group's comprehensive healthcare services.

Despite the general notion that healthcare services are immune to business cycle fluctuations due to the essential nature of healthcare, Netcare has experienced challenges. The company points to the competitive dynamics of medical aids, which exert pressure to accept lower prices, as a significant impact on its operations. This situation underscores the complexities within the healthcare market, where providers must navigate financial pressures while delivering essential services.

A notable development for Netcare was the termination of its contract to manage the Queen Mamohato Hospital in Maseru by the Lesotho government on 23rd March 2021, following a wildcat strike by nursing staff. This event highlights the operational challenges that can arise in international partnerships and the management of healthcare facilities.

Netcare has taken steps to ensure the resilience of its operations, particularly in terms of energy supply. The vast majority of its hospitals possess full island capacity, enabling them to operate independently of the grid. This capability is bolstered by Uninterrupted Power Supply (UPS) systems and a fleet of 200 backup diesel generators, ensuring that healthcare services remain uninterrupted despite external power issues.

For the fiscal year ending 30th September 2023, Netcare reported a 9.5% increase in revenue and a notable 36.5% rise in headline earnings per share (HEPS). The company highlighted a 6.7% increase in total paid patient days (PPD), inclusive of acute and mental health services, with improved occupancies reaching 64.4% for FY 2023, up from 60.1% in the previous fiscal year. This growth in activity and occupancy rates contributed to the reported revenue growth.

In an operational update covering the five months to 29th February 2024, Netcare provided insights into its performance, noting a marginal 0.3% growth in PPD compared to the prior period. The average acute patient day activity remained robust, at over 94% of pre-pandemic levels, with February 2024 witnessing the highest acute occupancy rate since February 2020 at 69.4%. The demand for mental health services also showed strength, with an average occupancy of 82.4% in February 2024. Additionally, the company reported a 6.2% increase in total revenue per PPD for the segment in Q1 FY 2024.

Despite these positive operational indicators, Netcare's share price has experienced a downward trend since peaking at R43 in March 2015, hitting a low around R12 in March 2020, and has since been moving sideways without a clear upward breakout. The share appears vulnerable at a P:E ratio of 13.65, suggesting potential for further decline. Investors and analysts are likely awaiting a significant break above resistance at 1713c to signal a change in trend and to assess the stock's future performance more positively.