Healthcare Saudi Arabian Community

Set with the author's own calculation method

Step 1 — Earnings Normalization (cleaning the input) Reported Q1 2026 net profit was 23.5M SAR, but it contained a non-cash loss of 13.3M from fair-value revaluation of derivative instruments. Stripping that out: Normalized Q1 2026 profit = 23.5 + 13.3 ≈ 36.8M SAR This is the single most important step. Garbage in, garbage out — any multiple applied to the polluted 23.5M figure would have produced a fake fair value. Step 2 — Annualizing with seasonal adjustment I did not simply multiply 36.8 × 4 = 147M, because Q1 was the seasonal trough (Ramadan + Eid suppressed elective procedures). Q1 2025 normalized was 51.1M while full-year 2025 delivered 200.4M — meaning Q1 historically contributes roughly 25% or slightly less of the year. Applying a similar seasonal pattern, plus partial recovery of the new centers' occupancy through the year: FY2026E normalized earnings ≈ 170–200M SAR EPS range = 170/44.3 to 200/44.3 = 3.84 – 4.51 SAR Step 3 — Multiple selection (the judgment call) Saudi healthcare peers trade roughly between ~20x (mature operators) and ~35x+ (premium growth like Al Habib). Almoosa sits below the premium tier: mid-cap, single-region, currently in margin compression. I assigned a fair P/E band of 24–28x — a discount to the sector leaders, a premium to no-growth operators. Method 1 (Comps): 3.84 × 24 = 92 → 4.51 × 28 = 126 SAR Step 4 — Forward exit value (capturing the expansion) Method 1 punishes the company for facilities that consume costs today but produce revenue tomorrow. So Method 2 values the completed platform: Assumption: third Al-Ahsa center + new Khobar specialist hospital lift bed capacity by roughly half, gross margin reverts to ~31%. Projected FY2028 normalized profit: 280–320M SAR → EPS 6.3–7.2. Exit multiple: 26x (midpoint of the fair band, since by 2028 it's a proven grower). Exit value (2028) = 6.3×26 to 7.2×26 ≈ 164 – 188 SAR Step 5 — Discounting to present value Discount rate: 9.5% — a cost-of-equity proxy built roughly as: Saudi risk-free ~5% + equity risk premium ~5.5% × beta ~0.8 for a defensive healthcare operator. Discount period: 2 years (mid-2026 → mid-2028). PV = Exit value / (1.095)² = 164/1.199 to 188/1.199 ≈ 137 – 157 SAR Step 6 — Triangulation (weighting the methods) MethodRangeWeightRationaleNormalized comps92–126~30%Real but punishes transition yearDiscounted exit multiple137–157~50%Best fits an expansion-phase assetStreet target169–192~20%Single-analyst coverage, low reliability Weighted blend → fair value ≈ 140–155 SAR, midpoint ~148. Step 7 — Sensitivity (the honesty layer) The output's fragility, quantified: ±1 point on the P/E multiple → ±~4.5 SAR on fair value ±10M SAR on the earnings estimate → ±~6 SAR ±1% on the discount rate → ±~3 SAR on the Method-2 leg So the defensible claim is never "the stock is worth 148.00" — it's "fair value clusters in the 140s under reasonable assumptions, and the dominant swing variable is gross margin recovery, not the discount rate." One final point of intellectual honesty: Steps 2, 3, and 4 each contain a judgment of mine (seasonality pattern, multiple band, 2028 earnings power). A different analyst with equally defensible inputs could land at 120 or at 170. That's not a flaw of this model specifically — it's the nature of valuation. The method's value isn't the point estimate; it's that it forces every disagreement into a specific, testable assumption you can monitor quarter by quarter.