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Shetty Manghat have stripped NMC of cash. No doubt the advisors are chasing the money trail to try and recoup but this will take time and their liquidity issues are more immediate.
I think coronavirus could in fact hurt NMC. The thought process for covid helping NMC valuation is that there will be a mass take up of beds due to affliction rates but it may be the opposite is true. Government advise tends to be self isolation and in 80% of cases the symptoms are mild. That leaves 20% who won't all be premium clients and will be taken care of at cost, not sure what Medicare in UAE is like. In the mean time the high margin business will be affected by people self isolating. Pp
Does, Dogger, have a look at a few of the posts I've put up over the past couple of days. i've tried to rationalise what's been happening and if you see logik with my rationalisation then it may ease your stress until we have the final reports.
Just confirm only GKSD have declared an interest in making an offer but I don't think they are in a position to do so, they until 9th Mar. Talks between Mubadala and NMC are very preliminary and rate of progress of the talks is unknown.
My assumptions are predicated on the ratios being largely correct with some adjustments due to the supply chain financing that we know have to included on the balance sheet. You are correct, we won't know anything until the Freeh report and official company financials are released. I think MW pretty much hit the nail on the head regarding the unaccounted for off-balance sheet financing and depleted cash reserves. However I think he could be wrong about the over valuation of tangible assets, a lot of corporations tend to over value them anyway, and overstated net income. Everything from MW subsequently is just spin, CB himself said that he didn't think NMC was a complete fraud.
From my understanding the margin call led the price to dive to about 13/14. The subsequent fall was due to a fire sale by the Bhuttis, after which we saw some more ii's buy in. A significant increase in the volume traded does not alter the investment thesis and that's what the ii's will be focused on.
Existing shareholders would have to sign off on a sale and I for one would not sell if short term liquidity is the only issue and would be happy to take part in a rights issue. Otherwise NMC would have to call in the Administrators who would then be tasked with finding a buyer and sell to the highest bidder, could mean that Mubadala miss out. By this time though we would have a clear understanding of the financials and know exactly what the company was worth.
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If my rationale for the current state of NMC is correct then the original investment thesis still stands. High margin business, operating in wealthy countries that have an ageing population.
Based on all this, it should be a matter of “when” rather than “if” NMC shares are unsuspended. When that happens I suspect the company will be seen as a Value/Growth play. I expect the price will bounce quite sharp from current valuations, factoring in a dilution from for Mubadala’s interest, and experience some resistance levels as the shares move from short term holders to long term holders.
Take the following with a bucket load of salt and is only here to generate debate.
Firstly, we need to differentiate some of the big players here and I think they fall into 2 camps. Shetty and Manghat in one corner and the Bhuttis in the other. One has to also remember that Manghat is a qualified accountant with the ability to "fiddle" with the accounts. Clearly there has been some "fiddling" with the numbers and misuse of company resources and I think it will transpire that it's been simply stolen to fund Shetty's lavish lifestyle and Manghat probably would have received some of it too. Shetty probably sees NMC as solely his company and so using it as a personal cash cow, I suspect, isn't too far from the truth. Aside from pledging the NMC shares as collateral and lumping extra debt onto NMC's balance sheet I don't think he's done much else. The extent of theft of cash will come out after the review but my guess is that it's significant. I now believe that the Bhuttis were not aware of Shetty's actions and learned of them as and when the rest of us did, which is why they dumped their stock, not knowing how much Shetty has abused NMC. For Shetty's part I don't think he has completely run NMC into the ground, because of his close connection to it, but has of course taken it close to the brink.
I'll next address the concerns with income. MW's alleges that NMC's margins are too good to be true especially when compared to its peers, Mediclininc and Aster. In the case of Mediclinic the ratios have not, in fact, been too dis-similar pre-2018, and with Aster they are about 3 times greater. On the other hand, NMC revenue is generated mostly in high GDP countries, UAE, Europe, whereas Mediclinic draws significant revenues from South Africa and Aster from India. Compounded by the fact that NMC has a greater presence in those more affluent areas, it's not too inconceivable that its ratios would be better than its peers.
We know that the banks have probably withdrawn some of the remaining credit that was available to them ($400M), cash has been severely depleted and that they will find it extremely difficult to access short term credit in light of the credit downgrades. It is no wonder short term liquidity is an issue. But I think the approach to/from Mubadala is sensible and I think mutually beneficial for Mubadala and NMC. Mubadala would be securing the largest health care provider in their home country and safeguarding several thousand jobs and NMC can continue operating a profitable business. If short term credit is truly the only issue with continued operations then the NMC board will be loathed to sell at cut price. I suppose there is nothing to stop Mubadala from using its leverage and buying out NMC on the cheap but there are many investors that would be burned especially if it transpires that short term credit was the only issue, and in the world of business, goodwill can have significant value.
....................cont()
Please please please do not take investment advice from anyone on this board! Adzy does not know your risk appetite or personal circumstances. He is also very much aware that he could lose on any one of his bets but I suspect he's well enough diversified. Taking large positions in single stock names and on market moves is gambling.....nothing more. Also chasing your losses on the stock market is akin to chasing losses in a casino. It's not smart investing.
Speak to and IFA or invest in mutual funds.
I think Shetty has a very high opinion of and confidence in NMC (even now), it is his "baby" after all, and it's probably for the same reason he was so ready to use it's goodwill as he has done so, pledging shares as collatoral and taking on further debt at NMC to fund his other business ventures.
I think the NMC shares which he pledged as collateral were genuinly forced sells and were called by the banks because of the dramatic price crash at Finablr. I suspect that Finablr debt has call triggers on the NMC collateral (not sure if this has already been confirmed), should its share price fall as it has done due to the hack. Shetty could not have predicted the hack at Finablr, otherwise I expect he would have done more to protect his NMC position. Shortly after the margin call, the Bhuttis also dumped their shares, which I think is to protect their own interests considering the shares they lost due to Shetty's actions. At this stage they probably also thought what else is Shetty hiding from them and perhaps the MW report isn't a complete fabrication. I suspect a growing rift between them and Shetty.
It was Shetty who instructed Freeh, perhaps naively, but I think it's because he felt there is fundamentally nothing wrong with the operations of the company. Thus leading me to think he was unaware of the inconsistencies in reported accounted. Could Manghat be solely responsible for missusing company assets or did he act at the direction of Shetty and Shetty did in fact know? Certainly counter intuitive to hiring Freeh.
One thing to note is that apart from the margin calls on the shares, Shetty has not sold any of his NMC shares except the ones he gave up to Goldman recently (I'm relatively certain in saying this unless I've missed or forgotten something).
All speculation.
You've made a number of valid points there but I'll answer one of them. If they were to fold they only need one advisor, not the three they've taken on and the additional financial expense that comes with.
The revelations about the majority owners share dump certainly brings into question the fundamentals of the company. One can infer that the shares were dumped for one of two reasons. That the company is over levered, under financed and net income has been over stated and so the financials are a complete fraud and equity is worthless. The other reason is that they knew, based on the assumed fundamentals, that the company was over valued. This could be because as we have found out since, there are at least additional unaccounted for debt to go on the balance sheet, and so they sold out high.
Those reasons, however, assume that the Bhuttis were privy to all of Shetty's dealings and they consented to them. Although, I can't imagine the Bhuttis would have been happy with Shetty pledging their shares as collateral for his own business ventures, especially if they don't gain anything in doing so (I'm not 100% certain that they didn't benefit). If they weren't aware, then what else were they not aware of? They could have been spooked into dumping shares as events unfurled. All this is pure speculation on my part but hopefully the summary is logical.
Why haven't we heard anything official from NMC in relation to the ongoing viability of the company and to add some market confidence? I think the reason for this is that NMC are in a closed period due to the GKSD takeover approach. I could be wrong here as I'm not clued up on the UK Takeover Code, but if I'm correct we should hear something more robust from NMC after the 9th. The dumped shares in and of itself doesn't completely lay waste to the financials and the actions of the NMC management in taking on so many advisers suggests that it is salvageable, otherwise we would have expected further resignations from the management team by now. I expect that Freeh has had some kind of a guiding hand in this. We come back to square one whereby we really need to see the Freeh report to know the correct state of the company.
True, could just be the Bhuttis confirming there positions.
I didn't think the banks held anymore shares they could call on.
Without looking into the accuracy of the numbers and if they have indeed been able to offload the shares I suspect there's a bigger fish willing to take on NMC, could be Mubadala. This is pure speculation, but if true expect an RNS soon.
Rastuss, just had a look for a more fuller explanation and I don't think I can do a better job than wikipedia.
alwayswrong, I like to think my input on this board has been relatively balanced, free from emotion and not wildly reactive to new news. I'm not saying that the reported financials are completely inaccurate, i'm saying that clearly there are some discrepancies because NMC have said as much.
The ADR is a secondary market outside of the LSE. The banks holding the underlying are allowing the trades.
The collar requires 3 things to work. The underlying asset, a call option and a put option. It seems to me in this case they went with the convertible bond because the collar would have been for a set term and the bond in the meantime would have generated returns.