Liberum ups Spire Healthcare to 'buy'
By Michele Maatouk
Date: Tuesday 04 Aug 2020
(Sharecast News) - Liberum upgraded its rating on Spire Healthcare to 'buy' from 'hold' on Tuesday, saying that while Covid-19 has effectively put the business "in deep freeze for 2020", the private hospital operator is set to benefit from a surge in NHS waiting lists.
It noted the fact the NHS suspended elective procedures in the UK as a result of the coronavirus pandemic.
"Spire was not spared but it has signed an agreement with the NHS whereby much of its costs are covered during this period that we expect to end in Q4," Liberum said. "The result is that even with this headwind Spire should exit 2020 with net debt increased by just 15%.
"But, demand will be stronger than ever: The exact timing of a return to normal operations is not easy to call but if the current situation persists for another two to three months the NHS waiting list could reach 10m or 2.5x December 2019."
Liberum expects Spire to play a key role in reducing this over the next two to three years and said this provides much greater visibility than it has ever had on revenue expectations.
It also argued that new management has built a much stronger operational platform over the past two years to meet this demand.
"With the shares off circa 40% since mid-Feb and the long-term prospects for the business as good as they've been for some time, we believe that now is the time to buy and upgrade our rating having been a hold for three years," Liberum said.
The broker trimmed its price target on the stock to 120p from 125p.
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