Net Income: EGP85.2mn, -10% Y-o-Y, +5% Q-o-Q, -39% vs. EFGe
Revenue: EGP413.6mn, -4% Y-o-Y, -1% Q-o-Q,  -26% vs. EFGe
Gross Profit: EGP162.2mn, -23% Y-o-Y, -17% Q-o-Q,  -40% vs. EFGe 
Operating income: EGP98.6mn, -9% Y-o-Y, +9% Q-o-Q, -34% vs. EFGe
 
Mouwasat reported disappointing 4Q18 headline figures with net income dropping 10% Y-o-Y (-39% vs. EFGe) on weaker revenue and margins. We also believe that some IFRS adjustments distorted the results. FY2018 earnings were higher c7% Y-o-Y.
 
Revenue fell (-4%, -26% vs. EFGe) for the first time since 4Q14, which is disappointing given: i) the launch of Khobar hospital in 3Q18 (220 beds, 100 clinics); ii) the continuous addition of new outpatient sub-specialties; and most importantly iii) the renewal of contracts with top-two insurers (c50% of revenue; one renewed in Jan 2018 and another in July 2018) and Aramco (c15%; in Jan 2018) at favourable terms. Revenue for the full year rose 11% Y-o-Y.
 
Gross margin fell c9.7pp Y-o-Y to 39.2% likely impacted by the Khobar hospital launch (12-18 months to breakeven) and some restatements; gross profit fell 23% (-40% vs. EFGe). EBIT margin decline was tamer at 1.3pp to 23.8% with EBIT falling 9% Y-o-Y (-34% vs. EFGe). 
 
The company’s BoD had proposed DPS of SAR1.75 (total of SAR175mn) for 2018, coming broadly in line with our forecast (EFGe: SAR1.80) and higher than the SAR1.50 paid out in 2017. The dividend implies a payout ratio of 49% and a dividend yield of 2.3%.
 
Overall a very disappointing set of results - while we are not concerned by the margin pressure as it was likely mostly driven by the new hospital launch, the revenue decline is alarming. We have a Buy rating on the stock, but we will be revising our numbers to reflect the results. (Hatem Alaa, CFA, Nada S. Amin, Ahmed Moataz)
 
Mouwasat Medical Services: SAR76.60 as of 28 Feb. 2019, Rating: Buy, TP: SAR120.00/share, MCap: USD2,043mn, MOUWASAT AB/4002.SE