Kovai Medical Care and Hospital - Health and Wealth


(ricky76) #41

Hitesh,

Thanks for the kind words.

I do agree that given their recent cash generating power they will get the debt down overtime although I would have felt more comfortable if they had disclosed patient numbers bothforeignand local and bed utilization. Without the benefit of local knowledge I am unable to judge whether the hospital has continuous patient pulling power despite high competition. If so, is it because of star doctors or competitive pricing or both? Understanding the source of success is very important for any business if one is to avoid nasty surprises!

While reduced debt and increased profits will lead to positive pricing action and trading profits from current levels it is unlikely to lead to a sustained re-rating. for that to happen investors need to be happy with their future strategy. In my view, there are broadly two options for the management to create value for shareholders

1). aggressive expansion- the mgmt starts building/acquiring another hospital through raising more debt or equity in their quest to becoming a leading hospital chain in India. If done without clear positioning it will destroy shareholder value.

2). steady grower while sharing profits with shareholders- the mgmt starts paying at-least 50% of profits as dividends and uses internal accruals to expand steadily with a clear strategy ( e.g best cancer treatment in the South), this option will likely create long term value for shareholders and I would be more than happy to be a part owner of such a business!

cheers

Bobby


(RH) #42

Absolutely agree Bobby.


(Ayush Mittal) #43
[quote="ricky76, post:41, topic:768053694"] > Without the benefit of local knowledge I am unable to judge whether the hospital has continuous patient pulling power despite high competition. [/quote]

Hi Bobby,

Here is some quantitative data which I had extracted from rating reports:

Details 31-03-2008 31-03-2009 31-03-2010 31-03-2011 31-03-2012 31-03-2013
Pharmacy Sales 21.67 25.44 34.05 45.38
Cost 17.52 20.45 26.51 35.29
Profit 4.15 4.99 7.54 10.09
Margins 19.15 19.61 22.14 22.23
No of beds 450 481 614 691
Occupancy % 94% 93% 77% 89% 94%
No of out patients 98000 113000 116000 186000 212000
No of in patients 28000 32000 35100 44717 49153
No of major surgeries 9081 10681
Medical Professionals 1173 1347 1628 1712

The data is from the ratings report at different periods and hence there may be some mismatch at certain dates. You the above can be seen as a rough data to give an idea.

Regards,

Ayush


(ricky76) #44

That’s great, much thanks Ayush!

the bed occupancy seems to be pretty high and has been ramped up real fast, since the actual growth in patients is not that high it would imply that they are staying longer due to condition being more acute ( likely cancer related given their latest expansion).

Usually it takes quite some time to ramp up patient numbers and occupancies, assuming the numbers are kosher this would imply that demand is still ahead of supply in that region. With such high occ. rates they would likely be turning away patients!

Would you have the actual ratings reports by any chance? If so, appreciate if you could forward to [email protected].

On another note, I checked with a friend who knows a doctor in Coimbatore, his view was that most of the hospitals in Coimbatore are of a high standard and Kovai is good but does not really stand out, he says all of them are making good money.

Best,

Bobby


(Muthukumar) #45

Yes, coimbatore is having set of hospitals like KMCC called KG, Ganga hospital, and etc. They’re making very good money. Set of updates from my friends have told that they’re very happy with KMCC.

One query on 2012-13AR – They’re planning to setup hospital in chennai. If this is materializing, then fund raising may add more in their debts? Please share your views on this.


(Sridhar) #46

Q4, Results..

Mar '14 Dec '13 Sep '13 Jun '13 Mar '13
Net Sales/Income from operations
86.54 85.71 82.88 78.89 74.25
Power & Fuel -- -- -- -- --
Employees Cost 12.96 11.32 11.18 11.75 11.14
Depreciation 4.66 3.9 3.91 3.84 3.1
Other Expenses 26.3 27.47 27.03 26.02 24.25
P/L Before Other Inc. , Int., Excpt. Items & Tax 15.35 15.59 13.64 12.07 12.23
Other Income 1.41 1.07 1.14 0.99 0.95
Interest 5.61 5.93 6.13 6.27 6.45
net profit 7.06 6.97 5.48 4.21 4.76

(Sridhar) #47

Equity - 100cr and debt - 154 cr

D/E stands at 1.54 compared 2+ last year.


(Sridhar) #48

Q1 results are good

Sales increased from 78 cr to 92 cr

Np increased from4.5 cr to 8 cr.

and stock price also doubled.

Any more juice left in this stock?


(Vishal Kothari) #49

I have just read Annual Report for FY14. Kovai Medical has mentioned their expansion plans as follows,

The Hospital in order to enhance the patient satisfaction has decided to add 150 beds to its existing capacity - 75 beds for Emergency & Intensive Care and 75 beds for patient rooms at Main Center. In addition, it has also undertaken modernization / renovation work at Erode Center as well as at City Center. **The capital expenditure for the above plans outlined will be approximately 80 crore. **

As a part of our ambitious growth plans, we plan to set up a new Hospital in Chennai in order to reach out to wider population. **It is envisaged to have a 300 bed Hospital at an estimated cost of 300 crore. **

The above projects will be funded by existing funds, internal accruals, incremental debt and equity. It is always our endeavor to provide improved outcomes to patients and in this regard we have added one more speciality i.e. liver transplant.

What I feel ?

Currently, KMCH Share holdersâ fund is at 101 crores. Long term debt and short term debt stands at 154 crores and 4 crores respectively. Debt to Equity works out at 1.6. Now, Again if KMCH goes the Capex of 380 crores (80 + 300) in near future than it will again increase the debt burden on the books heavily. Currently interest coverage is 3.25x which I feel is not completely safe enough. So in such a scenario, increasing debt or dilution of equity remains an area of concern for me. However, Positive aspect is KMCH looks very focus on its aggressive expansion plans.

Kindly share your thoughts

Diclosure:- Invested around 185 and 272 with 2 years perspective


(Varadharajan Ragunathan) #50

IMHO, one should exit the stock. Chennai market is highly competitive with many good hospitals - apollo for cadio, MIOT for orthodontis.

I was a M & A banker in this space and kauvery is struggling in chennai inspite of having beenn there for 3-4 years.

Setting up a hospital by building the facility yourself is a capital destructive process - hospitals take 3 years to break even and 9 years to payback unless it becomes a large destination hospital like medanta or NH.


(Abhishek) #51

If you look at the cash the company has available and add up the cash flows going into the next year or so, its evident that the company is going to have to resort to a huge amount of debt (at least 200 crore) to fund the expansion plan of 300 crore. This (imho) is going to impact the profitability in a big way.I could be completely wrong and missing something.

Disc: Tracking the company since 6 months but not invested.


(Vinoth Kumar) #52

Hi all,

I am from Coimbatore itself. Yet, i know that this hospital is listed in Exchanges by 2014 only. If i have known it earlier, would have invested in it earlier too. I have been looking at the growth of the hospital over the past 10 years, and needless to say it is tremendous.

One interesting aspect i say for the Kovai Medical is the possession of a unique asset in form of land. If one look at the book value stated for the land in Balance sheet, it is stated at 6.82 Cr. They possess a lush 20 acre land, where most of its facilities are located. 1 cent of land near KMCH, at current market price is 10 lakh, which makes 20 acres of land at 200 Cr! By acquiring this asset at the earlier period or over the years when its’ book value was at 6.82 Cr, they are able to restrict the capital expenditure to only buildings, medical equipments and technologies alone. That could be a factor why the Returns have been good. If they are putting up efforts to expand further in the same location, it would have been great, as indicated in the past.

Now coming to the expansion plans, esp, Chennai, If you are going to start from scratch, you start from procuring the land, till finishing construction and installing medical facilities. Real estate costs in chennai being higher in near skirts of city, along with higher competition would make it a not so profitable option. This would dilute the return generation capability of KMCH in the future. (Agreeing to Varadha’s point)

Adding up 300 Cr of debt would reduce the cash flows generated in the future. Yes the current inherent business is doing exceptionally well, but what i expected was to sustain this for some years, generate satisfactory cash flows before plunging for expansion in metros. In a way, it would be profitable if they continue to expand in the tier 2/3 cities alone for the brand, as the brand is well known across Tamilnadu.

Watching closely at the updates for the share.

Planning to call them some time tomorrow, to know about their expansion plans progress.

Regards

V R Vinoth Kumar


(Ayush Mittal) #54

Kovai medical is hosting 25th year Silver Jublilee Celebrations on 21st June, 2015 at their hospital campus in Coimbatore. It would be great if someone can attend the same and share updates, if any.

Here is the invite - KMCH - SILVER JUBILEE CELEBRATION INVITATION 2015.pdf (2.0 MB)

Thanks,
Ayush


(Ravindra Mutyala) #55

Again Kovai delivered good set of numbers…
For FY15 topline increased by 20.2%
Bottomline increased by 62%
At present EPS of 35.22 rs kovai is trading at PE of 17.35


(Harsha Rama Rao) #56

Added to this we have the margins moving up which is a good sign from 7.1% in 13-14 to 9.6% in 14-15.


(Rajarshi) #57

Also jubilee interim dividend of 10% and final dividend of 15%. Plus debt also has reduced…Great news before Silver Jubilee itself…


(Ravindra Mutyala) #58

Can any one through some light on the status of Chennai Hospital and when it is going to be operational ?


(Ravindra Mutyala) #59

Any updates on yesterdays Silver Jubilee Celebrations?


#60

below is latest update


(Raj) #61

Summarily -
Kovai Medical Center and Hospital (KMCH) opened a 60-bed critical care centre on Sunday to mark its silver jubilee. It also set up a Yoga Centre to coincide with the International Yoga Day celebrations. Its Department of Oncology will offer cancer treatment at concessional rates throughout the year.Further, it has also begun work on a 300-bed hospital at Sholinganallir in Chennai. This Rs. 300-crore project is expected to be completed by the end of 2016.

Addressing the silver jubilee celebrations, Nalla G. Palaniswami, chairman and managing director of the hospital, said that its future projects include setting up an 85-bed facility at Sulur and a cardiac centre to replace the existing KMCH City Centre. This would have a cath-lab with a ten-bed intensive care unit. In addition, he said, the hospital plans to build more 100 to 120-bed facilities in Salem, Mettupalayam and Karur besides one being
contemplated at Palakkad, Kerala.

source = http://www.thehindu.com/news/cities/Coimbatore/adhere-to-code-of-ethics-kerala-governor-tells-doctors/article7340681.ece?ref=tpnews