Dr. Sulaiman Al Habib Medical Services Group (HMG, Tadawul 4013) is the largest listed hospital group in Saudi Arabia by revenue. At SAR 221.50 it is worth about SAR 77.5bn, or roughly 32x last year's earnings. This piece asks one question: what does an investor actually own at that price, and what has to happen for the price to make sense?
This is a long read, about 9,000 words. It covers how a paediatrician's outpatient clinic in Riyadh became a 4,000-bed group, how Saudi healthcare is paid for, ten years of HMG's numbers, the build-out of the last three years, the claims fight with insurers, the competition, the family behind the company, and what the share price assumes. My quarterly update on HMG covers the latest results. This is the full picture.
The short version, in five points:
The capacity is built. The patients are not yet. HMG ran the same 1,913 beds from 2019 to 2023 and filled them to 80% occupancy. Then it opened six hospitals in 15 months and passed 4,000 beds. Group occupancy fell to 58% in FY24 and 60% in FY25. By my estimate the new beds are around 40% full and earn less than a third of a mature bed. Filling them is the single biggest driver of value.
The track record is real. From FY16 to FY25 revenue tripled, from SAR 4.6bn to SAR 13.7bn. Net profit went from SAR 1.0bn to SAR 2.4bn. Return on equity has been above 29% every year since FY22. No other listed hospital group in Saudi Arabia comes close.
The payer is getting tougher. Three quarters of HMG's revenue now comes from insurers, and three insurers write 86% of the Kingdom's health premiums. Those insurers barely make money on health. HMG's write-offs jumped to about 3% of revenue in FY24 and FY25, and its bad-debt charge was cut in FY25.
Growth is now funded with debt. Since the IPO, dividends of about SAR 8.6bn have been about twice the free cash flow. Bank debt went from SAR 1.9bn to SAR 8.5bn. The cycle of build, fill and repeat now runs with leverage.
This is a family company, and it builds with family contractors. The founder and his family control at least 71%. A related contractor, MASAH, built large parts of the new hospitals. The deals were disclosed and put to shareholders, but the outside investor carries the cost if prices are not tested.
My model puts the base case at about SAR 205 a share, 8% below the price. Peers trade at less than half of HMG's multiples. The price is not crazy for a business of this quality, but it already pays for most of the ramp-up going right.
This is personal research, not investment advice.
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