Backlash for Block11 Jan 2020 19:21
Backlash for Block
Block has faced criticism himself. Outspoken critic and CEO of Universal Strategies, Sabah Al-Binali, calls the short seller’s Muddy Waters report “vacuous” and says most of it is based on “conjecture”.
Of NMC’s use of reverse factoring for some of its facilities, Al-Binali argues: “The gist of [Muddy Waters] argument here is that they believe some of [NMC’s] leases should be classified in a way that would make them debt on the balance sheet. What Muddy Waters does not make clear, and they would have learnt this had they taken Financial Analysis 101, is that a lease is a liability regardless of whether it is considered debt. A first year analyst who doesn’t understand this would be fired on the spot.”
The company claims to treat over 8.5 million patients each year
While the Muddy Waters report points to potential overpayment for assets by NMC Health, particularly in regards to Brightpoint Hospital [now NMC Royal Women’s Hospital], Al-Binali argues that Block is “ignorant” of the UAE and the GCC.
“A first glaring example is their assertion that the construction of Brightpoint Hospital is at an inflated price… Muddy Waters then tries to do a comparable, which shows their complete ignorance of the UAE and GCC. As an example, they list NMC Royal, Khalifa City as having a cost of $3,793/sqm whereas Brightpoint was $7,686/sqm. Anyone who knows Abu Dhabi knows that the location of Brightpoint is prime relative to Khalifa city, not least because Brightpoint is on Abu Dhabi island whereas NMC Royal is on the mainland and the difference in land costs alone are much greater. Comparing the two locations is like comparing Manhattan Island with Brooklyn.
“Furthermore, when Brightpoint opened in 2014 this was at the height of the UAE’s economic cycle. NMC Royal opened in 2016, two years after the collapse of the oil price that deeply affected land prices. A second comparison is to two hospitals in Saudi, which has a land mass greater than Western Europe, relative to the scarce land on Abu Dhabi island. Muddy Waters is clueless or intentionally misrepresentative,” Al-Binali says.
The Emirati CEO also questions Muddy Waters’ unnamed sources, hinting at Block’s possible use of bias investigators to manipulate financials.
“Muddy Waters repeatedly talks about ‘sources’ that their investigators received information from, without naming those sources or providing credible evidence to support these so called sources. If Muddy Waters is accusing NMC of using related parties as a way to manipulate financials, how do we know that Muddy Waters isn’t using their related investigators to manipulate their report? Why did Muddy Waters not hire an independent, credible, internationally renowned investigative company?” Al-Binali says
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