Relatively unknown £4.3bn cap NMC Health (NMC) could potentially knock postal service Royal Mail (RMG) out of the FTSE 100 at the next reshuffle in September.

NMC, which is the largest private healthcare provider in the United Arab Emirates (UAE), is now worth more than Royal Mail (£4.2bn).

Furthermore, it is only £240m away from being valued as one of the top 100 firms on the London market (which qualify for inclusion in a FTSE index).

At the current rate, we believe it is a strong contender to enter the FTSE 100 in the very near future.

WHAT’S BEEN GOING ON?

NMC’s shares have risen by 36% since the start of 2017, helped by publishing a strong set of full year results in March and favourable regulatory changes in April.

The latter refers to the Abu Dhabi government saying it would no longer charge individuals extra to use private healthcare, thereby making the system more appealing to the public.

NMC believes the change will help to drive its earnings before interest, tax, depreciation and amortisation (EBITDA) towards the top end of a $335m to $350m range in the year to 31 December 2017.

Deutsche Bank analyst Mark Hammoud expects NMC to beat these expectations, pencilling in $356m for EBITDA.

He highlights the firm’s ‘outstanding growth profile’
and ‘aggressive acquisition strategy’ and anticipates that NMC will continue to outperform its regional peers such as Mediclinic (MDC).

‘Growth is still driven by a mix of organic expansion, improving profitability and M&A activity in the home care business,’ says Hammoud.

MAKING STRATEGIC PLANS

NMC has already expanded into new territories including Oman and Saudi Arabia.

In August 2016, management announced plans to expand into Saudi Arabia through a new initiative that would more than double capacity in the long-term care market.

Across the group, NMC plans to increase bed capacity from 680 to 1,450 beds over the next three years.

The private healthcare company is also targeting specialist and higher margin services such as in-vitro fertilisation (IVF) and long-        term care.

Investec analyst Cora McCallum is confident that NMC will continue to perform well. Estimated economic growth of 2.3% in the UAE this year, further roll-out of services and realising the benefits of recent hospital acquisitions are likely catalysts for the share price, as well as potentially getting a place in the lauded FTSE 100 index.

NMC Health (NMC) £21.03

Stop loss: £16.82

Market value: £4.3bn

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