Union Diagnostic and Clinical Services Limited

[balaliyu]

Cashcraft has got no reputation in this forum!!! Read up the Stockbrokers Rating threads....

Cheers....B

[pumping]

I think he/she meant "CashCrap"......

Understand one thing when one says one man business. Even Oracle and Microsoft were close to one man businesses at some point but it is not every business that has a market that can make it grow to a mega size....So your example of Zenith and FCMB does not hold water. These companies can become so big because there is a market...

[windywendy]

Originally Posted by pumping

I think he/she meant "CashCrap"......

Understand one thing when one says one man business. Even Oracle and Microsoft were close to one man businesses at some point but it is not every business that has a market that can make it grow to a mega size....So your example of Zenith and FCMB does not hold water. These companies can become so big because there is a market...

Are you implying that there is no market for Union Diag's services? Have you been following up on the NHIS scheme and how it's been progressing? Also have you given any thoughts / attention to the increase in budgetary allocations and donor funding to the health sector, all of which has come as a result of the NHIS scheme? Just food for thought ...

By the way, how's philly, I used to live there (center city)

[pumping]

WindyWendy,

No, that's not what I mean. I am looking at it from the sector point of view. At this moment you cannot compare the value of the healthcare sector to the banking sector in terms of the value of the market. A company cannot grow beyond it's market. If you put together all the companies in the healthcare sector you'll be surprised the capitalization is less than Zeniths'...

Philly's all good. I'm nowhere near downtown so life is peaceful. Did u run away from the winter blues for all year sunshine elsewhere..?

[windywendy]

Originally Posted by pumping

WindyWendy,

No, that's not what I mean. I am looking at it from the sector point of view. At this moment you cannot compare the value of the healthcare sector to the banking sector in terms of the value of the market. A company cannot grow beyond it's market. If you put together all the companies in the healthcare sector you'll be surprised the capitalization is less than Zeniths'...

Philly's all good. I'm nowhere near downtown so life is peaceful. Did u run away from the winter blues for all year sunshine elsewhere..?

Naa, I didn't run away. A job offer came knocking, was too good to pass up and was more family friendly (old job involved too much travel -- I still have lots of unused frequent flier miles and hotel points after 3 years ). So I ditched the old job and moved out of town . . . Philly was a lot of fun though.

OK let's talk about the health sector. While it's not that big now, I believe the future (and not-too-distant future) is very bright. What the NHIS does is to basically make health services more affordable, as the cost is split between the insurer and the patient. What that means for health care providers is increased revenues. Now think of a developing country like Nigeria with a population of over 100million people and the potential for health care providers if only half of those people can access good health care. With all the attention being focused on the health sector in Nigeria -- both by the government and donor organizations, there has been a substantial increasing in funds pouring into that sector. There is also private equity pouring in. That sector is set for growth, though it may not be as fast as that of the banks. But even today, banks are beginning to invest in the sector. For instance, GTB owns 40% of Hygeia's HMO (through GTA), and IFC also recently invested. Zenith also has set up a medical insurance subsidiary (Zenith Medicare). So the sector is definitely set for some real growth.

Right now, over 5000 health care providers have been registered by the NHIS and of that number, less than 150 are diagnostic centers. I learned that Union Diag is one of the most highly equipped diagnostic centers in the country. They're not just a lab, as someone mentioned earlier on this thread, rather lab services is just one of the many services that they offer. I think of the future of union diag this way: health insurance will make medical services more affordable (even to people in very remote locations -- I heard for instance that the goverment of one of those EU countries (I think netherland) recently set up a fund to provide health insurance premiums for some farmers). Since hospitals will not usually have their own fully equipped diagnostic centers (as it's not their core business), they'll usually refer patients to diagnostic centers as the need (more-often-than-not) arises. With more people being able to afford health care services, there'll most likely be more referrals and more revenues for such centers. Also, cost will be less of an issue and so people will most likely go for the best quality service available.

In addition, union diag is making plans to become a HMO and this should add to their bottom line -- HMO business is big business here in the states, so I anticipate it would be the same in Nigeria (why else will the private investors get involved?). There are already 32 registered HMOs in the country and more are making plans to get accredited. Also, private sector companies are beginning to join the NHIS ( I heard that Shell has registered all of its workers in the scheme) and this will mean more patronage for the health care providers, especially the fully equipped ones -- afterall it's unlikely that a typical shell worker for instance will go visiting a sub-standard care provider, especially when the medical service cost is subsidized.

So if companies like union diag use the money it gets from the PP to further equip itself and expand so that it becomes more accessible, it will position itself very well to take advantage of the growth that's already happening in that sector.

[pumping]

WindyWendy,

Thanks for all the revelation in your response. U made very solid points. I have no doubt that the healthcare sector CAN grow the way you have described it but it will take it's time. I believe that this time is in the very distant future..and this is time I do not have now...

This reminds me of the federal mortgage bank and the National Housing fund. Is that what Nigerians are using to build houses now...

I won't get too carrried away with the speed of implementation of such scheme....and the ability to meet set objective...

I hope for the best sha. Let's see how it goes.

[bwalaman]

Dangote Flour, NAHCo, International Brew, Japaul and 1 0r 2 banks in the horizon.

Bad timing and packaging for Union Diag which is still a Ltd, with no clear plans to become Plc. Coupled with the fact that it is pretty much still a regional medical service provider with no aggressive branch expansion.

Union Diag, simply does not measure up if one has to decide where to put their money- Dangote, NAHCo, Japaul or even International Brew.

Not saying it is not a good company...but if I had to rank the companies listed, Union Diag comes last!

[RethinK2.0]

@bwalaman

i beg to differ:
Int'l breweries is a debt laden company with a negative earnings per share and plans to remain the red for the next 2 years. Even by their ambitious forecasts, no dividends will be paid for the next 4 years. Thats a whole decade of no dividends/bonuses if we backdate from 2009. No visible brand/products either....do u drink trophy beer? Do u have friends whose favourite beer is trophy? my guess is NO.

Nahco
Buying nahco now really looks like buying something at the peak or why else will you buy a public offer at a trailing price-to-earnings of 18! Nahco is not as trashy as intl breweries but it is in no way miles ahead of union diagnostics

I won't comment on japaul yet cos we aint seen the prospectus....

Union Diagnostics is being offered at a 2007 pe of around 11.
Is it risky? of course....very little track record and ambitous forecasts.
Is it a bluechip? Of course not..
Does it look cheaper than intl breweries? of course yes!
Does it look cheaper than nahco? Yes!

Its a risky stock but the expansion plans are huge...12 branches already and they plan to have one in every state by 2009...i would surely rank union D ahead of INtl breweries..and possibly nahco

[Geeman]

[quote=bwalaman;5962]
Bad timing and packaging for Union Diag which is still a Ltd, with no clear plans to become Plc. Coupled with the fact that it is pretty much still a regional medical service provider with no aggressive branch expansion.QUOTE]

I don't understand the point about Union Diag not having aggressive expansion plan. Having read the prospectus myself, I came a way with a different conclusion.

[Tiko4u]

Hello all, i'm new to this site, really appreciate all the advisory comments. Pls could someone help me, i want to download the dangote flour ipo form from the internet, would love to download from their official website cos other websites have company names on the form eg cashcraft, oceanic registrars etc i dont live in naija and my broker dont work for cashcraft/oceanic registrars. i don't know if its ok to fill a form with a company's name on it and give to another company. Would also need the union diagnostic pp form online. ideas anyone???? i beg una oh!!!!!!!!

[hispy99]

Cashcraft Asset Management Limited - A member of the Nigerian Stock Exchange

The names you see on the form are the issueing/stockbroking firms of the offer.

Union Diagnostic pp was supposed to have closed on the 13th of Sept though, but you never know with these things, you can still ask around.

[MR. CEE]

Originally Posted by RethinK2.0

@bwalaman

i beg to differ:
Int'l breweries is a debt laden company with a negative earnings per share and plans to remain the red for the next 2 years. Even by their ambitious forecasts, no dividends will be paid for the next 4 years. Thats a whole decade of no dividends/bonuses if we backdate from 2009. No visible brand/products either....do u drink trophy beer? Do u have friends whose favourite beer is trophy? my guess is NO.

Nahco
Buying nahco now really looks like buying something at the peak or why else will you buy a public offer at a trailing price-to-earnings of 18! Nahco is not as trashy as intl breweries but it is in no way miles ahead of union diagnostics

I won't comment on japaul yet cos we aint seen the prospectus....

Union Diagnostics is being offered at a 2007 pe of around 11.
Is it risky? of course....very little track record and ambitous forecasts.
Is it a bluechip? Of course not..
Does it look cheaper than intl breweries? of course yes!
Does it look cheaper than nahco? Yes!

Its a risky stock but the expansion plans are huge...12 branches already and they plan to have one in every state by 2009...i would surely rank union D ahead of INtl breweries..and possibly nahco

You never analyse Dangote flour Does it mean that Dangote is better than Nacho?

[windywendy]

Originally Posted by bwalaman

Dangote Flour, NAHCo, International Brew, Japaul and 1 0r 2 banks in the horizon.

Bad timing and packaging for Union Diag which is still a Ltd, with no clear plans to become Plc. Coupled with the fact that it is pretty much still a regional medical service provider with no aggressive branch expansion.

Union Diag, simply does not measure up if one has to decide where to put their money- Dangote, NAHCo, Japaul or even International Brew.

Not saying it is not a good company...but if I had to rank the companies listed, Union Diag comes last!

I guess it'll depend on your objectives for investing and your time horizon. I personally won't invest in any company that I don't see doing well in the medium to long term, especially if there are myriads of investment opportunities competing for my cash. On a personal note however, I see no reason why any serious investor will put their money into Dangote flour. The company is facing declining profitability, deteriorating liquidity and has had negative working capital for most of its existence. In addition, it deals in a commodity market and it's products are highly price elastic. To make matters worse, Dangote is offering it for 35times trailing earnings! Unless a company has some outstanding growth potential, no one should be paying that much. Granted, they have some expansion plans, but I'm not convinced that the noodles market is as profitable either -- I mean, the market is already awash with cheaper imported noodles, and is already faced with stiff price competition. I don't believe the prayer mat project is as profitable either, because there just isn't a large enough market to make any meaningful difference to dangote flour's bottomline. In addition, people who use prayer mats don't change very often, so I don't really see that much turnover happening with that project. The only profitable aspect of the company is the saks business. But this only contributes a small proportion to profits. In addition, over 80% of its sales are to the dangote group. I'm very uncomfortable with this, as it poses a huge concentration risk especially with all this talk about the government wanting to lift the ban on cement importation.

My opinion on the proposed expansion is as follows: if you're in a very fragmented and competitive market in which the price of your products is largely determined by the buyer, and are also experiencing rapidly declining margins and a worsening liquidity position, why pump more money into expanding in that same market? Those additional assets will only earn lower and lower returns. And indeed this has been the case with dang flour -- asset base has been increasing while returns on those assets have been declining. So what makes anyone think that expanding the asset base further will improve returns, especially since the company's products are not necessarily the consumers' number 1 choice? If the expansion is being done into some other market with more interesting economics (e.g. like flour mills expanding into cement production), then that'll make more sense . . .

Dangote flour is definitely one investment I'll pass on, the business doesn't have very sound economics. There are far better alternatives out there. In my opinion, union diag has far better prospects than this one. There are also more interesting alternatives in the market going for far cheaper P/Es.

[c kenneths]

@windy wendy, I will support your stand on Dangote flour as I may not buy owing to other substitues that abide for each of the products in Dan flour's line, for sacks you have Bagco from Flour mills, for noodles there are uncountable substitutes, flour itself has too many other producers so this may not be like Dansugar.

But the offer will be oversubscribed due to sentiments alone.