Our opinion on the current state of NTC

The Netcare Group (NTC) operates hospitals and medical response teams throughout South Africa and Lesotho. It has fifty-nine hospitals, four of which are public/private partnerships, employs 22000 people in South Africa and has 10600 beds. Netcare 911 operates from seventy-nine sites and has over 1000 paramedics. Healthcare is generally not impacted by the business cycle because consumers have to pay for their healthcare, even in a recession, but Netcare says it is being impacted by the competitive nature of medical aids which force them to take lower prices. On 23rd March 2021 Netcare received a letter from the Lesotho government cancelling its contract to run the Queen Mamohato Hospital in Maseru over a wildcat strike by nursing staff. The vast majority of Netcare’s hospitals have full island capacity, allowing them to operate independently of the grid. In addition, all facilities are supported by Uninterrupted Power Supply (UPS) systems and a fleet of 200 backup diesel generators across the portfolio. In its results for the six months to 31st March 2023 the company reported revenue up 11,9% and headline earnings per share (HEPS) up 40,4%. The company said, "Acute hospital occupancies for March 2023 recorded the highest level since the onset of the pandemic. The sustained improvement in activity has resulted in Group revenue for H1 2023 exceeding H1 2019 pre-pandemic revenue by 9.7%". These latest results underscore Netcare's defensive nature. In an update on the year to 30th September 2023 the company said, "Notwithstanding the constrained economic environment and unseasonal lower activity during June and July 2023, total paid patient days (“PPD”) for FY 2023 are expected to grow by c. 6.8% against FY 2022. Revenue for FY 2023 for the Group and the Hospital and emergency services segment is expected to grow by 9.0% to 10.0% compared to the FY 2022 Group revenue of R21 636 million and Hospital and emergency services revenue of R21 024 million". In a trading statement for the year to 30th September 2023 the company estimated that HEPS would increase by between 35% and 38%. Technically, the share was in a downward trend since its peak of R43 in March 2015 until its bottom in March 2020 at around R12. Since then the share has been drifting sideways and there is no upward break yet in sight. We need to see a break above resistance at 1713c. On a P:E of 15,18 the share still appears vulnerable and may fall further.