Update on this
The GCC division to be sold to alpha GCC for EV of 13,540 Cr , Alpha GCC will have 35% ownership by promotors & rest by consortium of PE firms.
Concal scheduled at 11:30Am today : Webinar Registration - Zoom
Find more details in PPT
Correct me if Iโm wrong teamโฆ.
All said and done if Aster GCC business gets sold - that basically means we lose our cash cow
Yes weโd receive cash in exchange, but the cash would not justify the current valuations.
Aster would have deploy this cash and then build up the same level of operations it had back in GCC and the chances of that to happen is very unlikely.
GCC business was very much a monopoly because of few hospitals and very high insurance penetration. In India you have significant competition with low insurance penetration.
Hence this deal is really unfavourable to retail investors.
Let me know what you think? Am I missing something?
4 Likes
Hi Rishabh
An alternate view for your consideration
1. Valuation post demerger (analysis done on a pre-tax basis for simplicity - please do your own post tax assessment of cash payment)
- Market cap today (pre-merger): ~Rs 20,000 cr
- Implied market cap for India business: Rs 11,800 cr (Rs 8,200 cr equity value of GCC business based on equity value of Rs 1 bn)
- Implied EV/EBITDA (TTM) of India business net of cash = 23 (EV/India TTM EBITDA. Assume 100% GCC equity value paid out)
- From an industry perspective, you could look at other similar companies (my review was EV/EBITDA is of the magnitude of 18-40). So on a relative basis looks fairly valued to undervalued (depending on what multiple you use). Once detailed historical financials for India business are available, should be possible to understand DCF basis
2. GCC Cash cow and outloook for future investments
- While the GCC was the cash cow for the business, the India business is now generating cash - using EBITDA as a proxy for OCF, it now contributes 31% of EBITDA (TTM) vs 29% in FY22.
- Key drivers for improvement in cash flow is maturity of Indian hospitals (>3 years), more leased land for hospitals, brownfield rather than greenfield expansion and initial testing of asset light O&M options
- Cash flow should further improve as newer hospitals also mature (ROCE of hospitals >3 years is 25.8% vs total ROCE of 14.1% for India)
- Perhaps the GCC might have provided some incremental cash for further expansion. It now appears that for keeping the same pace of expansion, there would likely be an increase in debt in India (headroom is improved after higher debt GCC entity separates) and likely Private Equity investment (as per the Q2 FY24 call and general interest in the industry). Of course, PE investment will result in dilution - but the expectation is that they should drive further value
3. Competitive dynamics
- Supply side competition: There are indeed many hospitals in India (large national - Apollo, large regional - Narayana, Aster, Max, Medanta, etc, plenty of small โunorganisedโ local ). Within regions the competitive dynamics vary - e.g. in Kerala I would say that Aster is the market leader. In Karnataka it is more competitve. However, I am not convinced being a national players adds any benefits compared to regional for hospitals (unlike pharmacies where procurement volumes matter). Happy to hear alternate views
- Demand side drivers: I am not sure India is yet at a stage where Supply > Demand. If you look at most hospitals, mature hospitals are able to maintain 65%+ occupancy with increasing ARPOBs. New hospitals reach similar numbers in 3 years. We are perhaps still in a secular demand stage which will only accelerate with increasing wealth, health awareness and insurance penetration
Hope this helps in your thoughts
Disc: Invested with a full position and likely to be biased. Am not a SEBI registered advisor and none of the above is investment advice - please do your own due diligence
4 Likes
* From an industry perspective, you could look at other similar companies (my review was EV/EBITDA is of the magnitude of 18-40). So on a relative basis looks fairly valued to undervalued (depending on what multiple you use). Once detailed historical financials for India business are available, should be possible to understand DCF basis
Narayana Hrudayalaya Ltd
EVEBITDA 21.5
Operational Beds - 6096
Founded - 2000 - 24 year ago.
Compared to Aster India
EVEBITDA โ Valued more than NH post demerger
Operational Beds - 4080 (India - other than Kerala it is Asset light)
India operation started around 2014.
Key aspect is Aster yet to establish out side Kerala which enjoy its GCC brand recall.
My one cent is India business is unfavorable.
3 Likes
Interesting view Mr. Amrish - you are certainly more experienced than I am in the markets, and have clearly found a contrarian bet.
However, prima facie I would still stay away from Aster given my experiences when promoters sold the cash cow.
Dividend by Aster shall be in the range of Rs 110 to Rs 120/= per share
2 Likes
Shareholders approve separation of GCC business from India Business of ASTER.
1 Like
Why did Aster DM fell by 20%, any reason?
Itโs trading ex dividend
Any news on Q4 Results ?
There is news about morgan stanley buying Aster Stock and brokerages giving target of 418
Few of my takeaways from Q1 FY25 of Aster DM Healthcare
๐๐จ๐ซ๐ฉ๐จ๐ซ๐๐ญ๐ ๐๐ซ๐๐ฃ๐๐๐ญ๐จ๐ซ๐ฒ:
Aster DM Healthcareโs business outlook appears promising, with the company reporting strong operational and financial performance in the latest quarter. The companyโs focus on expanding its hospital network, especially in tier-2 and tier-3 cities, aligns with the growing demand for quality healthcare services in these regions. The managementโs emphasis on maintaining sustainable margins and improving operational efficiency suggests a well-planned strategy for long-term growth.
๐๐ญ๐ซ๐๐ญ๐๐ ๐ข๐ ๐๐ฅ๐ฎ๐๐ฉ๐ซ๐ข๐ง๐ญ:
- Expanding the hospital network through a mix of greenfield and brownfield projects, targeting a total of 1,700 new beds over the next three years.
- Focusing on tier-2 and tier-3 cities, where the company sees significant opportunity for growth and higher margins.
- Optimizing the capital allocation strategy by leveraging existing cash reserves and operating cash flows to fund the planned expansion, without the need for immediate dilution.
- Exploring inorganic growth opportunities, including potential mergers and acquisitions, to further strengthen the companyโs presence and capabilities.
๐๐๐ซ๐ค๐๐ญ ๐๐ฒ๐ง๐๐ฆ๐ข๐๐ฌ:
- Increasing insurance penetration and government initiatives, such as Ayushman Bharat, improving accessibility and affordability of healthcare services.
- Growing demand for specialized and quaternary care services, particularly in tier-2 and tier-3 cities.
- Shift towards daycare and outpatient procedures, leading to improved operational efficiency and margins.
- Ongoing consolidation in the healthcare industry, presenting opportunities for strategic acquisitions.
๐๐ง๐๐ฎ๐ฌ๐ญ๐ซ๐ฒ ๐๐๐ข๐ฅ๐ฐ๐ข๐ง๐๐ฌ:
- Expanding middle-class and growing awareness about preventive healthcare.
- Increasing government focus on improving healthcare infrastructure and accessibility.
- Favorable demographics, with a large young population requiring quality healthcare services.
๐๐ง๐๐ฎ๐ฌ๐ญ๐ซ๐ฒ ๐๐๐๐๐ฐ๐ข๐ง๐๐ฌ:
- Availability and retention of skilled medical professionals, particularly in tier-2 and tier-3 cities.
- Regulatory changes and pricing pressures that can impact the companyโs profitability.
- Competition from other established healthcare providers, both in the metro and non-metro regions.
๐๐ง๐ฏ๐๐ฌ๐ญ๐จ๐ซ/๐๐ง๐๐ฅ๐ฒ๐ฌ๐ญ ๐๐ฎ๐๐ฌ๐ญ๐ข๐จ๐ง๐ฌ:
Analysts raised concerns regarding the performance of the Andhra Pradesh and Telangana clusters, which have lower margins compared to the companyโs other regions. The management acknowledged the challenges and provided a detailed plan to improve the performance of these clusters, including optimizing costs, leveraging government schemes, and building on the companyโs existing presence in the region.
๐๐จ๐ฆ๐ฉ๐๐ญ๐ข๐ญ๐ข๐ฏ๐ ๐๐๐ง๐๐ฌ๐๐๐ฉ๐:
Aster DM Healthcare operates in a highly competitive healthcare industry, with both regional and national players. However, the companyโs strong focus on expanding its presence in tier-2 and tier-3 cities, where competition is relatively lower, as well as its emphasis on specialized and quaternary care services, provide it with a competitive advantage.
๐ ๐ฎ๐ญ๐ฎ๐ซ๐ ๐๐ซ๐จ๐ฃ๐๐๐ญ๐ข๐จ๐ง๐ฌ:
The management has provided a positive outlook, targeting a consolidated EBITDA margin of 20-21% in the medium term and a hospital and clinic segment EBITDA margin of 23-24%. The companyโs ability to achieve these targets will be crucial in determining its future performance.
๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐๐ฉ๐ฅ๐จ๐ฒ๐ฆ๐๐ง๐ญ:
Aster DM Healthcareโs capital allocation strategy appears prudent, with the company planning to fund its expansion primarily through existing cash reserves and operating cash flows, without the immediate need for dilution. The managementโs openness to exploring inorganic growth opportunities, subject to favorable valuations, is a positive sign.
๐๐ฉ๐ฉ๐จ๐ซ๐ญ๐ฎ๐ง๐ข๐ญ๐ข๐๐ฌ & ๐๐ข๐ฌ๐ค๐ฌ:
Key opportunities for Aster DM Healthcare include:
- Expanding its presence in tier-2 and tier-3 cities, where the demand for quality healthcare services is growing.
- Leveraging its expertise in specialized and quaternary care services to drive higher margins.
- Capitalizing on the industryโs consolidation trend through strategic acquisitions.
Potential risks include:
- Regulatory changes and pricing pressures that could impact the companyโs profitability.
- Challenges in attracting and retaining skilled medical professionals, particularly in non-metro regions.
- Intensifying competition from both regional and national players.
๐๐จ๐ง๐ฌ๐ฎ๐ฆ๐๐ซ ๐๐ฎ๐ฅ๐ฌ๐:
The companyโs focus on providing quality healthcare services, expanding its presence in underserved regions, and leveraging specialized and quaternary care capabilities suggests a positive customer perception.
1 Like
Potential merger with Blackstone backed Care hospitals on the cardโฆ
[Aster DM in advanced talks with Blackstone to expand its hospital network - CNBC TV18]
https://www.medicalbuyer.co.in/aster-qcil-merger-blackstone-likely-to-hold-majority-stake/
1 Like
Page 15 on concall:
I think the only thing we are quite keen on is building Aster India and like I mentioned in my opening remarks as well our Chairmanโs vision has always been how do we become one of the top three. So just looking at the right opportunities in terms of mergers, acquisitions that are available that will help us facilitate. So weโre just being opportunistic on that, looking, keeping our eyes open. We could not really focus on any of this until the GCC segregation was
over. So I think since that has given us kind of a cleaner slate now, it just opens up for other combinations and opportunities to be explored. So hopefully weโll have something more concrete to mention in the next couple of quarters.
1 Like
The company has pledged 98.9% of its holdings. A very high amount of pledging. Would be grateful if anyone tracking this company for long can explain.
