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Health operator struggling to cope as investors flee

by LLB Editor
22nd Aug 19 10:40 am

Shares in Middle East hospital operator NMC Health have been falling over the past year as investors became increasingly concerned about the business growing too fast and that acquisitions were masking poor organic growth. Analysts also raised issues around corporate governance, opaque accounting and supply chain finance.

Russ Mould, AJ Bell director, said: “The stock, perhaps unsurprisingly, became a target for short sellers who would profit from any further decline in the share price. The percentage of stock being used for short selling had increased from 0.5% in November 2018 to 5.4% on the eve of the latest financial results.

“Half-year results show that earnings continue to grow, it is getting better at managing working capital and debt pressures are easing.

“But perhaps the real reason behind today’s share price spike is chatter that two groups including one backed by China’s Fosun, are fighting to buy a 40% stake in NMC, potentially at a premium to last night’s market price.

“Weak share prices across the UK stock market are providing plenty of opportunities for big investors to swoop on companies with depressed valuations.

“We’ve seen Greene King and Cobham receive bids from foreign companies in recent months, and over the past few years since the Brexit referendum other UK names have been snapped up by overseas bidders including Berendsen and ARM.

“There will no doubt be more deals if sterling remains very weak as Brexit has effectively made it hunting season for foreign companies who see value in depressed UK assets.”

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