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SULAIMAN ALHABIB

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SULAIMAN ALHABIB

Reason for analysis Dr. Sulaiman Al Habib Medical Group 

Al Habib Medical Group is a prominent healthcare company in the Kingdom of Saudi Arabia, established in 1993 by Dr. Sulaiman Al Habib. The group has multiple branches spread in the Kingdom of Saudi Arabia as well as in Bahrain and the UAE.

Dr.  Al Habib Medical Services Group is listed on the Main Market On 22 Rajab 1441 corresponding to March 17, 2020 AD, the offering was a great success and was mentioned in several articles, where the offering was covered by more than 83 times with a value of more than 217 billion riyals, which is the highest coverage rate for the offering, which contributed to the increase in subscription requests from investors and qualified local and foreign institutions, and the largest volume of purchase requests from investors. The listing of Dr. Al Habib Medical Services Group was the first in the main Saudi market for 2020 and the first in the healthcare sector since 2016. After its listing for trading, it received the "Most Prominent Listing in the Market" award, where the results during and after the listing year were exceptional, and also, the group achieved an increase in profits to 489.3 million from the end of the first quarter of the current year, as well as a significant increase in revenues by 15.87% in the first quarter of this year.

In addition to financial development, the company's interest is also focused on developing and operating medical facilities with quality and more reliability and improving the experience of auditors, thus increasing the value of investors by gaining a competitive advantage in the market, which contributes to increasing strong and sustainable growth, not only for investors but also for the Kingdom in the health sector, where the group has harnessed its efforts in developing the health sector and is still seeking strategic and economic growth in the sector, especially in the field of technology and innovation by providing innovative solutions in the health field. She won the Stevie Award for Healthcare Innovation 2022. In the quality of health care, Al Habib Hospitals distinguished this and won the Quality of Healthcare Facilities Award "JCI" for all its branches. 

Due to the information mentioned about Sulaiman Al Habib Group, it is important to know about the nature of the sector in which the group operates, its future and trends, and we will also take a look at the financial position of Al Habib Group and its position in the market by presenting its financial performance and some of the comparison ratios with competitors, and this will benefit investors wishing to know the nature of health companies and investments in them, as the Kingdom's direction of investments in the health sector and investment opportunities provided by the state in this field were mentioned. 


Overview of the healthcare sector globally and in Saudi Arabia 

The healthcare sector is one of the largest and most complex sectors, representing 18% of the United States' gross domestic product in 2020. 

The healthcare sector is also characterized by some distinctive factors, such as extensive government intervention in healthcare markets and activities is widespread compared to other markets, partly due to the high demand for healthcare services, which is considered largely inelastic. Consumers and producers in this sector constantly face doubts regarding the needs, outcomes, and costs of services. 

As for the healthcare sector in Saudi Arabia, it is of great importance as it provides healthcare services to more than 31 million citizens and residents. The Ministry of Health plays a major role in the components of the healthcare sector, The sector can be classified as follows: 

  1. Ministry of Health: It occupies the largest share of hospitals and is a fundamental component in the regulation and provision of healthcare services in the Kingdom.
  2. Semi-governmental entities: These entities provide services to government employees and the military sector. They represent a smaller percentage in the distribution of hospitals.
  3. Private sector: Profit-making companies that operate in providing healthcare services. They represent 33.1% of the hospitals in the Kingdom.

The Healthcare Index is a statistical analysis of the overall quality of the healthcare system, including the structure of health care, the competence of health professionals (doctors, nursing staff, and other health workers); cost (in US dollars per person); the availability of high-quality medicines; and government readiness. 

It places Saudi Arabia in 37th place among global healthcare systems with a rating of 44.43 in the total health system. 


Developments in the healthcare sector 

The Kingdom of Saudi Arabia has witnessed remarkable growth in the healthcare sector in recent years as it has a strong health system that relies on the public and private sectors to meet the needs of citizens and residents.

Several factors have had a significant contribution to the growth of the sector, the most important of which are:


1.The Health Sector Transformation Program of Vision 2030

 is considered one of the most prominent government programs that aim to strengthen and develop the health sector in the Kingdom of Saudi Arabia. This program aims to achieve sustainability and excellence in health services, develop health infrastructure, and improve the quality of health care. The Saudi government is increasing investment in the health sector and expanding the network of hospitals and medical facilities throughout the Kingdom, as the percentage of increase in the number of hospitals reached 14% and the percentage of increase in the number of doctors is 71%, and the focus is on enhancing investments in the sector and partnerships with international companies. 

2. The role of the COVID-19 pandemic

in accelerating the process of digitization of the health sector, and this was demonstrated by the launch of some applications that aim to improve healthcare services, such as applications (Sehhaty) and (Mawid). 

3.The close relationship between the health and insurance sectors.

Since the adoption of health insurance and the gradual shift towards privatization, the health insurance sector has witnessed significant growth of 26.9%, with written premiums amounting to 53 billion riyals ($14.1 billion). This growth reflects the importance of the sector and the great opportunities available to it, which means more opportunities. Growth and investment.

4.As a result of the Kingdom’s encouragement to invest in the health sector and facilitating procedures

investments in the sector have increased. (Jadwa) Investment Company revealed that every riyal invested in the healthcare sector achieves an economic return of 1.8 riyals, which indicates that the current situation of healthcare policies and market conditions is very favorable. For investment opportunities.

Member of the Saudi Shura Council, Fadl bin Saad Al-Buainain, confirms that the health sector in Saudi Arabia represents a great opportunity for growth and expansion supported by the qualitative demand for health care, which makes it attractive to investors from home and abroad.


Future of The Healthcare Sector: 

Economists have predicted that 2024 will witness the growth of the healthcare sector in Saudi Arabia in terms of the abundance of opportunities, with the growth of foreign and domestic investment. There are many opportunities to invest in hospitals, especially since there are currently about 497 hospitals, most of which are owned by the public sector, so the private sector has begun to enter the healthcare sector more dynamically and actively, especially after the government announced its intention to privatize the sector. 

The Kingdom of Saudi Arabia has made health and medical services a top priority of its Vision 2030 and has therefore prepared a strategic plan for the Ministry of Health 2030, to ensure the implementation of the Health Sector Transformation Program. 

The strategic plan of the Ministry of Health aims to achieve several goals by 2025, namely: increasing the percentage of the population covered by health services to 88%, facilitating individual access to health care services, and a unified digital medical register should include 100% of the kingdom's population by 2025, which will improve medical practice and increase the ability of doctors to diagnose and treat diseases. The e-health initiative was also established, which is the effective and secure use of information and communication technologies to support health and related goals, facilitate individual's access to healthcare services, and improve the efficiency and quality of healthcare services. 

It is also expected that the value added in the medical devices and products market will reach a compound annual growth rate of 2.66% (CAGR 2023-2028), that the production in the medical devices and products market will reach a compound annual growth rate of 6.52% (CAGR 2023-2028), that the number of companies in the medical devices and products market will reach a compound annual growth rate of 5.15% (CAGR 2023-2028), and that the number of employees in the medical devices and products market will reach a compound annual growth rate of 4.71% (CAGR 2023-2028). 


Following an examination of the healthcare sector, our focus shifts towards a comprehensive exploration of the activities of the Sulaiman Al Habib Group and its market positioning. 


Timeline of Dr. Sulaiman Al Habib Group: 


The company services and market share: 

The Dr. Sulaiman Al-Habib Group has distinguished itself from its rivals in the post-pandemic era by gaining the largest market share 46.20% of the total revenues within the sector for the year 2022, thanks to its outstanding growth, diversification, and expansion of the range of health services, activities, and services supporting its operations, which also speed up the innovation process. 

1.Management delivering integrated health services and using medical and pharmaceutical facilities.

2.Offering digital health care solutions like home health care services, reference labs, and the ability to collect patient samples from their homes and launch them for field medicine services to deliver urgent care.

3.Managing and operating medical facilities that are related with it or others, such as the King Abdullah Medical City in Bahrain's Medical Center Group and the care divisions that are associated with the Ministry of Health in other locations.

4.Trade in pharmaceuticals, pharmaceutical-and-cosmetic products, and medical supplies.

5.Its ownership of a collection of real estate assets to support business interests.

6.Financing its companies' projects to build and outfit medical facilities, as well as overseeing those projects.

7.Making use of and leasing industrial property, patents, and franchise rights to subsidiaries.

In addition to being regarded as one of the most significant healthcare facilities with a focus on surgery, it is crucial to note that Al-Habib Hospital is one of the major hospitals with a focus on treating infertility problems and aiding in procreation.

The Dr. Sulaiman Al-Habib Group also consists of a number of its connected businesses, all of which help the Kingdom's healthcare system flourish and achieve a high standard. These businesses include: 

1-Cloud Solutions Company: Improving patient well-being by offering a range of technological solutions and services.

2-Medical Diagnostic Laboratories: This business conducts examinations and testing in very specific domains like genetics and others.

3-Home health care provider: assists those who require both ongoing and urgent care, such as those with mental or chronic disorders.

4-Flow Medical Solutions: focuses on offering creative answers to enhance the use of medical technology.

5-Administrative Settlements of the Company: Offers complete services for the administration of healthcare revenue, including consultancy, operations, and information technology.


The figure above presents the market shares of all companies involved in the healthcare sector in the Main Market (TASI) for 2022.


Analysis of external environmental factors affecting Dr. Sulaiman Al-Habib Group using PESTEL: 


SWOT analysis to assess the company's competitive position: 

The most important internal strengths and weaknesses affecting Dr. Sulaiman Al Habib Group were identified, as well as the most important external opportunities and threats that the company may be exposed to and affect its position.


Now take a quick look at the most prominent competitors of Dr. Sulaiman Al Habib Group: 

Al-Mouwasat Medical Services Company 

Al-Mouwasat Medical Services Company specializes in managing and operating hospitals, health centers, pharmaceutical warehouses, and pharmacies. It is considered one of the leading healthcare companies in the Kingdom of Saudi Arabia. The company either owns these facilities, leases them, or receives a percentage of the profits, as stated in the signed contracts. 

Al-Mouwasat was established in 1974 as an individual institution with a capital of SAR 100,000, owned by Mr. Mohammed Sultan Al-Sabie. Its purpose was to manage and operate medical facilities, and it started with the establishment of Al-Mouwasat Clinic in Dammam in 1975. The first comprehensive medical facility, Al-Mouwasat Hospital in Dammam, was established in 1984 and began operations in 1988. 

Al-Mouwasat Medical Services Company holds a market share of 11.2% of the sector's revenues for the year 2022. The company also owns shares in the following: 

  • Eastern Company for Medical Services Limited: 

It is a Saudi company with a capital of SAR 23.9 million, headquartered in Al-Khobar, Eastern Province, Saudi Arabia. The main activity of the company is the establishment and operation of private hospitals, clinics, and medical centers. Al-Mouwasat owns a 51% stake in the Eastern Company for Medical Services, which, in turn, owns Al-Mouwasat Hospital in Al-Qatif, Eastern Province. This hospital is operated as part of Al-Mouwasat's medical network.

  • Advanced Medical Complex Limited

 It is a Saudi company with a capital of SAR 10 million, headquartered in Dammam, Eastern Province, Saudi Arabia. The main activity of the company is the wholesale and retail trade of medical devices, equipment, and surgical instruments. Al-Mouwasat owns a 50% stake in Advanced Medical Complex, which, in turn, owns the Ophthalmology, Ear, Nose, and Throat Center located next to Al-Mouwasat Hospital in Dammam.

  • Specialized Medical Clinic Limited:

It is a Saudi company with a capital of SAR 500,000, headquartered in Al-Khobar, Eastern Province, Saudi Arabia. The main activity of the company is operating a cosmetic surgery clinic. Al-Mouwasat owns a 95% stake in Specialized Medical Clinic Limited, which, in turn, owns the Dermatology and Cosmetic Surgery Center in Al-Khobar.


Dallah Health Services Company  

Dallah has over 30 years of experience making it one of the best trusted healthcare providers in the Kingdom. The company's activities are concentrated in the hospital sector as a main sector where it manages its hospitals, and hospitals provide medical services to outpatient clinics, specialized clinics and inpatient departments. The company's capital consists of SAR 976,811,660 fully paid. the company's market share constitutes 13.83% of the sector's revenues for the year 2022. 

Other sub-activities of the company:  

  • Manufacturing,distribution and trade of medicines
  • Management and operation of hospitals and support services specialized in the maintenance of hospitals and medical centers
  • Other investments in the healthcare sector in the Middle East where the company invests in several health companies including Kingdom Hospital, Makkah Medical Center, Mohammed Al-Faqih Hospital and International Medical Center.

Subsidiaries: 

  • Dallah Pharma

was established to provide Dallah Health with a presence in one of the most important markets in the healthcare sector, which is the pharmaceutical and medical devices sector, which includes medicines, health products and cosmetics. Over time, it was able to expand its activities in the field of consumables, medical devices and nutritional supplements. And to build a reliable brand, it also expanded into the field of pharmaceutical manufacturing through the Dallah Pharma factory in Jeddah, which holds quality and manufacturing certificates.

  • Afia Al NakheelSupport Services Co. Ltd.

In January 2014, Afia Al Nakheel Company was established, which is a limited liability company affiliated with Dallah Group. Afia Al Nakheel provides its services to healthcare facilities to help health service providers adhere to local and international standards for the level of services provided and works within the field of management and operation of hospitals owned by a third party outside the areas where Dallah Hospitals are located. 


Al Hammadi: 

Al Hammadi Holding is a world-class provider of integrated healthcare services and enjoys a distinguished position in the management and operation of hospitals in Riyadh. The company serves thousands of customers annually, including citizens and foreigners. Al Hammadi Holding operates two hospitals in the Saudi capital, with more than 600 rooms and 180 outpatient clinics. The company aims to open two additional hospitals within the next six years, in addition to increasing the capacity of inpatient departments and outpatient clinics. This comes as part of the company's ambitious growth plans and aligns with Saudi Arabia's Vision 2030.

The company was established in 1985 as a sole proprietorship under the name of Al Hammadi Hospital, and in 2004 Al Hammadi Hospital was converted into a limited company under the name of Al Hammadi Hospital Company. In 2008, Al Hammadi Hospital Company was converted into a Saudi closed joint stock company, and its name was amended to become Al Hammadi Development and Investment Company, during the period from 11/06/2014 to 17/06/2014, the company obtained the approval of the Capital Market Authority to increase the company's capital to become SAR 750 million through the offering of 22.5 million new shares for IPO, after which Al Hammadi Development and Investment Company was listed on 17/07/2014 on the Saudi Stock Exchange (Tadawul).

 Al Hammadi Holding provides its services in a variety of medical specialities to provide treatment experience and medical services to patients. The Group's hospitals are in strategic areas with the best active locations in the Kingdom's largest cities, which allows the company to reach a wide range of citizens and residents. Al Hammadi Company is one of the leading companies in the management and operation of private sector hospitals that provide services to the middle and upper-middle segment, with a market share of 6.24% of the sector's revenues for 2022.


 Finally, we will show a comparison using some of the financial ratios of Dr. Sulaiman Al Habib Group and its competitors. 


Current Ratio:  

The current trading ratio is one of the liquidity ratios that measure a company’s liquidity and its ability to repay current or short-term obligations using current or short-term assets. 

We note from the graph that the current ratio of Suleiman Al-Habib over 4 years gradually decreased, in 2019 it maintained a fixed ratio ranging between 2.2-2.4, and at the beginning of 2020, it began to decrease from 2.24 until it reached in 2022 to 1.61, unlike Al-Hammadi, at the beginning of the years it was 2.29 and then began to rise gradually until it reached 2.41 and the rise in the trading ratio is not always healthy for the company, as this may mean a lack of good management As for Dallah, which is the lowest current ratio compared to competitors, we note that the current ratio was somewhat stable, as it fluctuated between 1.27-1.47, and for consolation, the current ratio is somewhat stable, so there was a slight increase in mid-2019 until mid-2020, then it began to decline and return to its past level.  

Referring to Sulaiman Al-Habib, the result of the decrease in the current ratio may not be a bad thing, as the decrease in this ratio may be the result of increasing short-term liabilities resulting from financing its investments, expanding the company and raising its capital. 


Gross Profit Margin: 

Gross profit margin is a measure of profitability calculated as the ratio of gross profit to net sales. It shows how much profit the company makes after deducting the cost of its revenues. 

At the beginning of 2019, the gross profit rate for Suleiman Al-Habib was 3%, then it began to rise observed since the beginning of the year until it reached 32% in 2020 and then almost stabilized, unlike Mouwasat, which had the highest total profit rate, at the beginning of 2019 it was 52% and then began to decline until 2020, reaching 32%, then it recovered its strength and began to rise until it reached 55%, as for Dallah and Al-Hammadi, we note that they maintained their stability The ratio was between 29%-37 over the four years and are considered to be among the most stable enterprises compared to competitors.

The reason for the rise of Sulaiman Al-Habib is due to the rise in profits resulting from several factors such as: 

-Excellence in services

-Increased sales in the pharmacy sector

-New contracts obtained 

-The increase in the number of patients, and maybe a result of the impact of Corona, and this reflected positively on the growth in hospitals.


Net Profit Margin: 

Also called the return on sales ratio is an indicator of profitability that is widely used to measure financial health. is the percentage of sales revenue remaining after deducting operating expenses, depreciation, amortization, interest and income taxes. 

Sulaiman Al Habib is considered distinguished in its financial performance, looking at the graph, we notice that Sulaiman Al Habib over the four years maintained a stable percentage that continued to rise gradually, as its percentage ranged between 17%-20%, unlike Al Hammadi, whose percentage changed during the four years significantly at the beginning of 2019 was 10%, then decreased to 9%, then rose until it reached 23%, as for Mouwasat, which is the highest percentage compared to competitors, it maintained a somewhat stable rate. Its percentage ranged between 28% and 33% - this indicates sustainable financial health, and this is also for Dallah has maintained a stable ratio during the four years.  

The reason for the change in the net profit ratio of Sulaiman Al-Habib may be due to several factors, including good management and cost change, when the cost rises, this will negatively affect the ratio, and this factor is one of the most influential factors on the ratio. 


Ratio of Operating Income to Net Sales (Operating Profit Margin): 

This ratio represents the net profit from sales revenues after subtracting administrative and general costs and operating expenses from the total profit of the company, the higher the ratio, the better, because indicates that the company achieves more profits and higher efficiency. 

During the four years, the profit margin ratio for Al Habib gradually increased in 2019-2022.2022 is considered the best year for Al Habib by achieving a higher percentage. This is due to improved cost management and the implementation of effective strategies that contributed to the increase in the ratio. 

For Dallah Company only, it witnessed fluctuations with slight differences, and in 2020, the operating profit rate increased slightly for Dallah Company, which may indicate the improvement of the company's management and economic changes, such as the Covid-19 pandemic, as the pandemic affected the entire sector, and therefore the percentage rose for Dallah, Al-Habib and Mouwasat Unlike Al-Hammadi Company, it witnessed a simple decrease in this year, but in 2022, Al-Hammadi achieved a high rise that may improve its management and follow better ways to increase the profit margin. It ranged from 21.5% in 2019 to 20.75% in 2022 and maintained a rise throughout the period. 

Therefore, it can be said that the operating profit margin ratios of Al Habib Company was stable throughout the period and the stability of the operating profit margin of the company is a positive sign, as it indicates its ability to maintain stable profits. 


Quick ratio

Short-term liquidity of a company is measured against its short-term liabilities and liquid assets are assets that can be converted into cash faster and in a short period without affecting the value of the company to cover its current liabilities and short-term debts. 

liquidity ratios of Al Habib Company started with high ratios for the year 2019-2020 at ratios of 1.81 and 1.88 but began to decline starting from 2021 and faced the largest decline in 2022, and this may be due to: 

  • Increase health care costs.
  • Delay in collecting payments from insurance agencies or patients.
  • Increasing debts owed to suppliers.
  • Difficulty in cash flows due to changes in the market or demand.

As for Dallah Company, it faced a decrease in the ratio compared to competitors, and the ratios ranged between 0.99 and 0.90, this is not a good indicator and affects the general financial position of the company, but in 2022 it returned to rise to reach 1.03, and this indicates an improvement in its financial position, unlike the years in which it achieved a lower percentage. As for the percentage of Mouwasat Company, it rose in 2022 to 1.49, which indicates an improvement in its performance in cash management and owning more liquid assets, as for Al Hammadi Company. It has high liquidity ratios compared to Al Habib and its competitors, reflecting strong cash management and superior financial performance. 


Debt-to-capitalization ratio 

It is one of the debt ratios that considers the amount of debt in the company's capital to finance its assets, the lower the ratio, the better, because its rise indicates that the company has greater risks. The best percentage is generally less than 1. 

As can be seen, the ratio of Al Habib Company in 2019-2020 was at 0.38 for both years, but starting from 2020 to 2022, the ratio began to rise slightly to 0.41 in 2022 The reason for the small increase is due to the high level of debt used to finance the company. Which may indicate an increase in investments or the expansion of the company. 

As for Dallah Company, it is the highest compared to the rest of the competitors since 2019-2022, with rates ranging between 0.43 - 0.53, which indicates that the company relies on debt more for financing, which may result in the increase in the ratio to Dallah's desire to achieve a greater return using debt, which is an indicator that its risks are higher than the rest of the competitors, and for consolation, it began in 2019 to gradually decline down to 0.27, which indicates that there is an improvement in the capital structure to create an appropriate financing mix with the least risks, As for Al Hammadi Company, it faced a significant decline starting in 2019 and maintained this decline for two consecutive years at a ratio ranging between 0.16-0.17, but in 2022 the ratio began to rise slightly, which indicates an increase in investments and expansion, and the need to finance its liabilities. 


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Resources: 

Prepared by: 

  • Shaden Alduraibi
  • Hanan Alshawi
  • Jawaher Alqahtani  
  • Dema Alsharef
  • Aliyah Alshathri
  • Reema Alajlan
  • Razan Aloli 
  • Joud Alsheddi
  • Reem Aljamaan
Maharah
Care Medical
STC