Markets Update: Does Agility's bid to take part in Kuwait's privatisation of the expat health care sector signal the turnaround that shareholders have prayed for?
Kuwait healthcare plan offers hope for Agility
Agility Logistics has been badly in need of a turnaround for some time, but a bid to take part in the privatisation of Kuwait's healthcare sector may offer just that, analysts said.
The company's stock has fallen 78.7 per cent since reaching a high in 2007 as it dealt with civil and criminal lawsuits for allegedly overcharging the US military on supply contracts.
But hope is at hand. Agility announced its intention to bid for a 26 per cent stake in Kuwait Health Assurance Company (KHAC) last week, with an offer of 25.6 million Kuwaiti dinars and an optional premium of 50,000 dinars to become a strategic investor in the company.
The company has a minimum capital requirement of 30 per cent of its 318m dinars capital.
The initiative is part of the Kuwaiti government's efforts to privatise the healthcare system for more than 1 million expatriates in the country.
Tapping that market could present a turnaround story for Agility, analysts from Rasmala Investment Bank said in a research note.
"If Agility wins the bid, the project could add 22.5 fils per share, or 4.8 per cent to our target price of 0.473 Kuwaiti dinars, based on our valuation using the assumptions in the KHAC executive brief," the report said.
"We assume a conservative annual growth rate of expatriates between 2.5 per cent and 3 per cent will lead to an eligible target market of about 1.7 million in 2015, which is likely to be KHAC's first year of operations."
Rasmala expects about three quarters of its expatriates to subscribe to KHAC from 2015 onwards, taking its cue from management guidance.
That is all very well. However, the company still faces a potentially costly lawsuit in the US.
The fallout from that case led to Agility being replaced as regional supplier to the American armed forces in the Middle East.
The company said the loss of that income resulted in a 19 per cent drop in sales and a 42 per cent plunge in net profits for the third quarter to 8.05m dinars. Agility closed at 395 fils per share