Asset heavy versus asset light
The big battalions of health care – nursing homes and hospitals – look cheap compared to outpatient.
Private equity typically pays more for bigger assets, with prices for so-called platform companies heading up towards the mid-teen EBITDA-against-enterprise-value multiples. So it is a bit of a head scratcher that really big groups like Fresenius can be trading as low as 9.4 times (net profit/market cap). And other big groups face a similar malaise. Look where Orpea and Korian are today. Shares in these pan-European care groups have crashed and they are trading at prices close to their property value.
You would think that all this would give infrastructure funds and other innocents pause for thought before they plunge into the perplexing world of outpatient imaging or even fertility. Yes, there are consolidation plays aplenty here but, particularly in imaging, tariffs can drop suddenly and steeply. A large German management consultancy recently told us it was getting paid in equity stakes. When an adviser is paid like that you know the market is toppy!
And then we have the Fresenius conglomerate. It is now clear that its Helios division is not going to be allowed to buy big using Fresenius paper to acquire more hospitals. No wonder Helios boss Francesco de Meo was so keen on asset-light subscription models when he spoke at HBI 2021 last September. He ain’t got the cash to buy bricks and mortar!
We agree with JP Morgan’s comments on Fresenius’ strategy: there can be little doubt that the four Fresenius divisions would each have far more compelling stories to tell if they were all independently listed or owned. Helios would go from being a Cinderella to homecare and nutrition arm Kabi to being seen for what it truly is: a truly formidable international hospital group with a global fertility business and a fearsome reputation for efficiency!
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
