Western hospitals leave Emerging Markets well alone
So what happened to Ramsay Health Care’s share price after it announced the cancellation of its big project in China? It went up 1%.
Despite the fact that shares rose 6% in the two weeks following the initial announcement of its plans, namely: to manage five hospitals in Chengdu, a city of 14m, via a JV.
The truth is investors have become increasingly chittery about China’s investment prospects in the intervening period. Investing there has gone out of fashion.
It is also noticeable that almost all the big “Western” hospital chains have steered clear of Emerging Markets. Ramsay is ploughing money into France, where tariffs are expected to drop 2% shortly. And the biggest of all, Hospital Corporation of America, has only gone as far as London. None of the big German groups have interests outside Germany! Even the big South African groups, with the exception of Life which recently upped its stake in Max of India, prefer Europe and the developed Middle East.
This reluctance reflects the high valuations of Emerging Market groups like Apollo, Narayana and IHH. HCA is trading on multiples which are less than half theirs. It also reflects what investors want from big health care service groups. They are perceived as safe havens in a troubled world. Private hospitals in Emerging Markets need links to local politicians and governments to win projects. It is not what you would call a transparent business.
None of this is likely to change soon – even for management contracts. Which is a shame, as these groups have huge pools of competence and skills. It is local entrepreneurs, linked to local elites and often local investors who will build hospital groups in Emerging Markets.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
