KEY THEMES
Cleopatra Hospitals Group [CLHO] has been one of the stocks that have witnessed a bit of a rapturing performance lately, gaining 13% on a month-to-date basis and hitting its best levels since 10 May 2021. We attribute a big part of the current rally to a strong set of Q1 2021 results as both top line and bottom lines grew 26% and 23%, respectively, with nice signs of margins withstanding. More recently, the stock has rallied since the start of the week some 7%, as the market rejoiced for the continuous share payback activities, having bought back 1mn shares last Monday.
We believe CLHO as a proxy to the health care sector is bound to have a much better year in 2021. Our belief is derived from: (1) a strong base effect that is expected to show up, given a stupendous volume recovery on the horizon, (2) expectations of a shift in investor preference from small caps towards mid and large caps, and (3) improved earnings leading to a P/E of only 24x, which is far off CLHO’s normal levels averaging 35x over the past three years.