Prime Transaction estimates an intrinsic value of 3.3588 lei for the MedLife share

The analysis team at Prime Transaction estimates an intrinsic value for the MedLife (M) share of 3.3588 lei, below the current market price of the private healthcare provider's securities, as shown in the attached report.

According to Prime, MedLife's acquisition activity this year has been almost non-existent, with the only new acquisitions announced between January 30 and now accounting for a cumulative turnover of 0.58% of the group's 2022 turnover.

"Although the degree of indebtedness is very high, the group intends to expand by 50 million euros the most important credit facility in the next period", the report also mentions.

According to analysts, its net profit for the last twelve months (TTM) turned negative, largely due to the considerable increase in financing costs. "Even on the operational side, things are not going as well as in previous years, but in the third quarter, the first positive signals appeared after several weak quarters," the report states.

For the third quarter of the year, MedLife reported a loss of 1.2 million lei, compared to a profit of 11.2 million lei in the third quarter of 2022. For the first nine months of the year, the group remained at the limit on profit, decreasing from 56.8 million lei in 2022, to 3.8 million lei in the similar period of this year. The TTM (trailing twelve months) net result reached a loss of 15.6 million lei, being dragged down by the large loss in the fourth quarter of 2022, according to the document.

"Considering the evolution of the operating result in the third quarter, it is possible that in the last quarter of this year the situation will improve and we will even see a net profit at the end of the year, even if it will not be close to the level of the last years", is scored in the report.

To value the MedLife stock, the team at Prime Transaction uses a combination of the market multiples method and the method and the future cash flow method. Using the market multiples method, analysts estimated an intrinsic value of 3.7502 lei, while using the cash flow method, the estimated intrinsic value of the M share is 3.6572 lei.

"Taking into account both types of evaluation results in an average value of 3.3588 lei/share, 20.03% lower than the closing price from the trading session of December 8", the Prime report states.

Compared to Friday's M share price, in the last part of the trading session, of 4.18 lei, the intrinsic value estimated by the Prime team is 19.6% lower.

The Prime Transaction Report is not an investment recommendation. The estimated value is not a target price that analysts expect the issuer's stock to reach, but only an intrinsic value, dependent on the confirmation of the assumptions detailed in the report. The report represents general information and is not a substitute for investment advisory services, the document also states.