Expansion In UAE And Saudi Arabia Will Increase Capacity And Operational Efficiency

Key Takeaways

• Strategic investments in high-growth sectors like oncology and organ transplantation are set to enhance revenue and margins through higher patient returns and long-term growth.
  
• Global partnerships and facility expansion in UAE and Saudi Arabia aim to boost medical tourism, complex care services, and EBITDA margins through improved capacity and efficiency.
  
• Strategic investments in oncology and operational challenges have strained profitability, with delayed facility ramp-ups and increased costs posing risks to margins and revenue growth.

Catalysts

Owns and operates multi-specialty hospitals and medical centers in the United Arab Emirates, the Sultanate of Oman, and the Kingdom of Saudi Arabia.

• Strategic investments in high-growth areas like oncology and organ transplantation are expected to enhance revenue and net margins due to their higher patient returns and long-term growth potential.
  
• The expansion of global partnerships and agreements with countries like Egypt, Maldives, and Uzbekistan aims to bolster medical tourism and complex care services, potentially increasing revenue streams.
  
• The onboarding of top global healthcare talents and strategic partnerships with institutions such as MD Anderson and Mayo Clinic are designed to improve patient treatment quality, operational efficiencies, and net margins by leveraging specialized care.
  
• Planned expansion with new facilities and increased physician capacity in UAE and Saudi Arabia is anticipated to drive revenue growth while improving EBITDA margins through better capacity utilization.
  
• The strategic focus on optimizing the patient mix and increasing efficiency in oncology services is expected to improve conversion rates, thus enhancing both revenue growth and EBITDA margins in the medium term.

Burjeel Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Burjeel Holdings's revenue will grow by 12.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.9% today to 17.0% in 3 years time.
• Analysts expect earnings to reach AED 1.2 billion (and earnings per share of AED 0.21) by about March 2028, up from AED 347.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.8x on those 2028 earnings, down from 22.2x today. This future PE is greater than the current PE for the AE Healthcare industry at 18.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 19.08%, as per the Simply Wall St company report.

Burjeel Holdings Future Earnings Per Share Growth

Risks

• Strategic investments in high-growth areas such as oncology have had a short-term impact on profitability, indicating a potential risk to net margins and earnings in the near term.
  
• The shift in case mix towards medical specialties like medical oncology, which have lower yield per patient compared to surgical specialties, may pose a risk to revenue growth and net margins until conversion rates improve.
  
• Delays in ramping up newly opened facilities due to extended regulatory negotiations and operational readiness negatively impacted revenue and net margins, highlighting ongoing execution risks.
  
• Despite growth, the underperformance of some assets, particularly due to the slow transition of oncology patients to higher-yield surgical and radiation services, could continue to impact revenue and net margins.
  
• Increased operating costs, including higher salaries and marketing expenses, have affected EBITDA margin, and sustainability of these costs is uncertain, posing a risk to future earnings.

Valuation

• The analysts have a consensus price target of AED2.74 for Burjeel Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of AED3.64, and the most bearish reporting a price target of just AED1.7.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be AED7.1 billion, earnings will come to AED1.2 billion, and it would be trading on a PE ratio of 19.8x, assuming you use a discount rate of 19.1%.
• Given the current share price of AED1.48, the analyst price target of AED2.74 is 46.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.