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Asiri Hospital Hld.[ASIR]: BUY

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  • Asiri Hospital Hld.[ASIR]: BUY

    ASIR’s recurring net profits to equity shareholders in 4Q FY19 came in at LKR 461mn compared to LKR 177mn in 4Q FY18. This is mainly due to the increase in deferred taxes arising from tax rate changes in 4Q FY18. For the full year, net profits were ~LKR 1.7bn, up 45.2% YoY. Topline was up 12.0% YoY while EBIT margins improved by 1.2pp to 22.8% in 4Q. Average Group occupancies came in at 53.0% compared to ~53.0% in 4Q FY18 and ~54.0% in 3Q FY19. Borrowings were up again QoQ and we believe that ASIR will borrow further in FY20E for working capital as Asiri Kandy ramps up operations. While post-April events ASIR saw a drop in OPD footfall and cancellation/postponing of surgeries, footfall is now returning to normal while surgeries are being rescheduled again. Taking into consideration these factors, our DCF valuation based (WACC 11.6%) target price goes to LKR 25.00/share (previously LKR 30.00/share). Including a DPS of LKR 0.60, we arrive at a total return of +31.3%. BUY. However, we note that the Healthcare sector is relatively one of the more resilient sectors in the current economic environment.
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