- KKR can profit from Gulf hospital emergency case
Private equity could be an alternative medicine for Gulf hospital operator NMC Health. Its value has sunk amid attacks by short-seller Muddy Waters and forced sales by large shareholders. A buyout would be a risky move, but the depressed share price offers a healthy cushion for potential acquirers including KKR and Switzerland-based GK Investment.
In December Muddy Waters’ Carson Block accused NMC of misleading investors by misstating its profitability and debt levels. NMC has denied the claims, but that hasn’t stopped its stock price from falling around 70% since Block’s campaign began. It doesn’t help that the group’s key shareholders, Saeed bin Butti and Khalifa bin Butti, both big investors alongside founder and co-Chairman B.R. Shetty, sold roughly 15% of the company to repay loans.
Carnage could be an opportunity. One of Muddy Waters’ chief accusations was that NMC had flattered its EBITDA margin by failing to report the services it provides which are then rejected by insurers. Take the likely worst-case scenario of a 9% rejection rate, as estimated by Muddy Waters, and the EBITDA margin would fall to around 18% from 25%. Apply that to 2019’s revenue of $2.6 billion, and NMC could still have generated $450 million of EBITDA last year. Put that on a 15 times multiple, in line with peer Mouwasat Medical Services, and it could be worth $6.7 billion.
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