Hedge fund buys into private care

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br life Independent Newspapers Brenthurst Clinic in Johannesburg is operated by Life Healthcare, whose gains have helped lift the JSE's health-care index 20 percent in the past year. Photo: Supplied

Johannesburg - JSE-listed private hospital operators are attracting South Africa’s largest hedge fund on bets that demand for fee-based care will not be smothered by the government’s planned state-funded health insurance.

The JSE’s six-member health-care index has rallied 20 percent in the past 12 months.

Netcare, with hospitals in South Africa and the UK, has led the index’s rally over the past four months.

The company reported a 17 percent jump in first-half profit, and earnings for competitors Mediclinic International and Life Healthcare also advanced in their most recent earnings reports.

“Over the last month we’ve been increasing our exposure to the three hospital groups,” Jean Pierre Verster at 36One Asset Management said.

“Our decision was confirmed by their good earnings.”

The health system is split between state-funded institutions and private, fee-based hospitals in a country that ranks fourth in the world for the prevalence of HIV, according to the UN.

The government plans to introduce a national health insurance system to cover the country’s 53 million people.

“We don’t view the government’s plans for a national health insurance scheme as a big threat,” Verster said on Monday.

“South Africans suffer from a high disease burden and a national health insurance will be very expensive.”

Mediclinic and Life Healthcare also operate hospitals outside South Africa, in countries including India and Dubai.

“Mediclinic is diversified to such an extent that more than two-thirds of its profit comes from offshore operations,” Verster said.

“Netcare earns about half of its revenue from the UK, while almost all its profit comes from South Africa.”

The JSE’s measure of health-care stocks climbed for four consecutive months to the end of last month.

Netcare advanced the most in the period, gaining 29 percent to Monday. Mediclinic rose 18 percent, while Life Healthcare increased 17 percent.

Adcock Ingram, the largest supplier of hospital products in the country, was the index’s worst performer, falling 19 percent amid a failed takeover attempt by Chile’s CFR Pharmaceuticals.

Rival drug maker Aspen Pharmacare gained 9.1 percent over the four-month period, while Ascendis Health added 4.5 percent. - Bloomberg


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