Macquarie downgrades Mediclinic to 'neutral'

Macquarie downgraded South African private hospital group Mediclinic International to 'neutral' from 'outperform' and reduced the price target to 770p from 860p.

The bank said it expects the business environment in the UAE health space to remain tough and that a recovery to the previous margin levels is highly unlikely in the near term.

"Furthermore, we also expect Mediclinic’s SA business to be under pressure on the back of the tougher trading environment while the Swiss business will continue to chug along with potential regulatory risks in the near to medium term."

Macquarie expects it will take some time for the company's Abu Dhabi operation to start turning around, having been hit by a meaningful loss of doctors since the reverse merger took place.

In addition, the bank said it is concerned about the potential oversupply of beds in the medium term in the region, which may lead to pricing pressure.

It also said that pre-opening costs for Parkview hospital, which is due to begin trading in the fourth quarter of 2018, will be negative for margins during that period.

At 1020 BST, the shares were down 2.4% to 693.50p, also weighed down by the weaker rand, which slumped overnight after Standard & Poor's cut South Africa's sovereign credit rating to 'junk'.