The shares of EM medical service providers have come under selling pressure since last week. The weakness in shares is driven by EM currency sell-off. The contagion risk remains significant. We report updated valuation metrics across GEM space.

Lokman Hekim reported a strong set of results in its March quarter financials driven by growth in Ankara locations. Both top line and margins came in above expectations.

Lokman Hekim 3Q17 results beat street estimates. The earnings available for shareholders read TL1.6M versus a net loss of TL0.8M reported in June quarter. There is significant scope to benefit from operating leverage; the risks are now tilted towards the upside.

Medical Park and Memorial are reportedly planning to list their shares through public offerings next year. Private equity plans to divest stakes are no surprise but the valuations may fail to impress the sellers. GEM sector valuations are uninspiring as disappointed investors have reduced exposure since the beginning of 2016.

IHH reported decent sales growth across regions. The margins are somewhat weaker due to investments. RM2.3B in December quarter revenues registering 18% growth. EBITDA reads RM614.3M (+5%). Earnings posted 74% YoY growth to RM415.8B on several one-off items and exceptional gains. Full fiscal year 2015 revenues and EBITDA grew by 15% and 10% YoY to RM8.5B and RM2.1B, respectively. Investments are broadly on track to meet targets.

Lokman Hekim reported one of its strongest quarters since Van hospitals were acquired. December quarter sales grew 24.0% on the year, driven by growth in inpatient admissions at Van hospitals and improvement in patient traffic at Sincan, Lokman's flagship. The company also reported solid margin gains with EBITDA margin widening by 394bp on the year.

India is a bright spot in emerging markets attracting interest from global healthcare providers. IHH Healthcare Berhad and Life Healthcare are among the most prolific investors in India. The industry should post 20%+ sales CAGR to 2019. We discuss how acquisitions are changing the industry and prospects for future capex. 

2015 was a busy year both with consolidation and capacity investments led by IHH and South African providers. Capex should slow down to allow demand to mature in 2016 but the backlog of investments remains rich. There is little change in industry margins despite investments. Recap of investments, M&A valuations in India, Myanmar and UAE are in the main text.