UBS thinks Spire Healthcare Group PLC (LON:SPI) will struggle to convince more of the British public to fork out for its private hospitals.
Spire has been targeting private payors in recent years, focusing less on winning outsourcing contracts from the NHS.
But analysts at UBS think further growth in the company’s self-pay division might be hard to come by and reckon management’s current growth guidance of around 15% a year is “optimistic”.
READ: Spire in rude health so far in 2019
“We see factors, though, that may limit self-pay growth,” they said in a note to clients.
“(1) the NHS' offering is broader, free and generally of high quality; (2) conversations with UK healthcare experts lead us to believe many UK citizens think healthcare should be funded and delivered nationally; and (3) surveys show public dissatisfaction with NHS waiting times is high, but has not deepened in recent years.”
Of Spire’s three divisions, private medical insurance is the biggest, but UBS believes this is also the most stable and therefore least likely to propel the stock higher.
In order for Spire’s value to really kick on, they want to stronger growth in self-pay and a recovery in the NHS business, which they regard as “more important potential swing factors”.
“Neither has yet materialised, however, so we see limited upside to mid-term expectations and initiate at ‘neutral’.”
Spire shares were up 0.2% to 120p in late-morning trading on Monday, the same as UBS’s target price.