The Global Top 50 by Market Cap
Who are the Global Top 50 Health Care Service Companies by market cap and what does this tell us about the industry? What is striking is how very few of the top 50 are now EMEA companies – just 13, and of those only four are headquartered in Europe, rather than the Middle East or South Africa.
This table shows the top 50 by market cap in early August 2023. It also shows their total revenues for 2022, as well as their presence, if any, in EMEA.
Click top right on the table below to expand to full screen.
We wanted to focus on pure play health care service groups, so we have excluded big insurers like UnitedHealth (although United does own a large hospital chain, Amil, in Brazil). We have also excluded the vertically integrated hearing aid sector on the grounds that their core product is medtech, although Amplifon, the Italian group with a market cap of $7.5bn, would have easily made the Top 50. We’ve also excluded groups like Teladoc and other tech players. Even had we included them, they would not have made much of an impact, following the crash of the last year. We have included Synlab and Mediclinic, although, in both cases, they are barely listed following their acquisition by majority shareholders.
Apart from troubled conglomerate Fresenius SE and its associate Fresenius Medical Care, Europeans are almost entirely absent from the list. Synlab aside, today the only other headquartered European player is Aevis Victoria, a tightly held (and very highly valued) Swiss group which mainly consists of Swiss hospitals.
EMEA, including Saudi, UAE and South African groups, takes the total to 13, but six of those are Saudi, which is clearly a separate market from Europe. A year ago, Orpea and Korian would both have made the list, but the impact of the Orpea scandal has reduced them. Orpea today is valued at just €112m!
Three big Europeans, Medicover, Spire and Terveystalo, hover just outside the Top 50 with market caps of just over $1bn.
It is perhaps unsurprising to find that 16 of the top 50 are US companies but it is striking how international the list now is with four Chinese, three Brazilians and eight Indians.
Inclusion in the list is down to stock market valuations, and the NMC and Orpea scandals show just how fast that can change! We’ve included 2022 revenue and profits which enables us to place a crude multiple.
It is striking how much this varies by country and region. Excluding those making losses and extreme outliers (anyone trading on a multiplier of over 100), US providers trade at 15.7, Europe including the big South African groups on 20, Australia and New Zealand on 21, SE Asia on 37, Saudi Arabia and UAE on 41 and India on 55.
This partly reflects growth rates. No European could match Apollo’s 39% revenue growth or doubling its EBITDA in a year. Saudi groups are buoyed up by the prospect of wholesale privatisation. Saudi groups are also very closely held which, as in the case of Aevis Victoria, makes it easy for a few investors to maintain a high valuation.
What does the list tell us about the future? If the current sky-high valuations for Saudi and Indian groups continue, we would expect some clever CEO to start acquiring cheap European groups as NMC did back in the teens. Big private equity groups like Elsan, Mehilainen and so on may prove tempting targets, although a move into Europe would be a change of investor narrative.
Note that 21 out of the top 50 already have a presence in EMEA, although, if we exclude groups solely in the Middle East, that drops to just 12. Aside from HCA, which has a lucrative and substantial UK private hospital arm, American hospital and psychiatric groups have failed to cross the Atlantic successfully. Tenet, Centene and Acadia have all entered and exited the market in the last decade. Whilst US groups have been hit by the way value health has shifted liability to them and away from insurers, we expect Americans will continue to have fatter, higher-margin fish to fry in their home market.
The IPO window in Europe has been more or less closed since Covid struck, so it is possible that we will see flotations in the next 18 months from groups such as Elsan, San Donato, Mehilainen or Hellenic Healthcare Group.
But the overriding message, we think, is that Europe remains a hard nut to crack. The highest valued groups are those in countries where the perceived market opportunity is largest, hence India, the USA, Brazil and Saudi Arabia. These appear, usually wrongly, to investors as huge, single market opportunities. To HBI the risks in Saudi Arabia where multiples are based on the assumption of wholesale privatisation under Saudi 2030 look high.
Europe is much more siloed by national borders and beset by tariffs set by public payors. And that means that European companies and investors, after Orpea, are unlikely to create serious global players in health care services, although the region continues to offer huge opportunities for consolidation.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
