Investment in Africa’s Health Industry

If you are going to get ill or injured, or plan to have a baby, then don’t be in Africa. That was one conclusion from my meeting last week with Dr Vivek Solanki. The other was that Dr Solanki might just be presenting penny share investors with a great investment opportunity as he seeks to provide a solution.

Dr Solanki’s company, VIP Healthcare, has just been acquired by the AIM-listed shell African Medical Investments, run by former England cricketer Phil Edmonds. AMI is valued at just £9m. But in a few years’ time it could be a substantial company generating considerable profits. Edmonds is well known as a financier of mining ventures across the Dark Continent. What he noticed is that whenever a miner gets hurt, he has to board a plane and travel across the country to find adequate treatment. So by helping to build better medical facilities, Edmonds can not only do something for those injured miners but also curry some favour with national governments.

But it is Dr Solanki who is going to be driving the expansion of AMI as it attempts to improve Africa’s health. And he’s unusually well qualified for the task. A doctor himself, he trained in Zimbabwe and moved on to specialise in trauma.

Solanki explained to me that the medical term ‘trauma’ was coined during the Korean War to describe the phenomenon of soldiers suffering from more severe problems than could be handled by any one specialist. Solanki set up Africa’s first trauma unit in Johannesburg’s Kempton Park in 1991. He went on to develop a further twelve units, a one hundred and fifty bed hospital and a Well Woman clinic throughout Southern Africa and the Middle East.

Huge demand for better medical facilities

These were mainly undertaken on behalf of hospital groups, but recognising the huge demand for better medical facilities from Africa’s growing middle class and from the expatriate community, he set up two centres of his own. The first is the Medical and Travel Vaccination Centre at Johannesburg’s International Airport, and the second is in Harare.

The former has six beds, forty-eight staff and deals with twelve hundred patients per month, giving them travel vaccinations for instance or treating them for deep vein thrombosis. The Trauma Centre in Harare deals with trauma medical emergencies but also provides a vaccination service and local ambulance support.

Owing to Zimbabwe’s troubles, the number of patients treated at this clinic has halved to about six hundred per month. But this will become less important in the big scheme of things as AMI develops the ten or so centres that it plans over the next three years.

The first two of these will be opened next year in the Tanazanian capital, Dar es Salaam, and Mozambique’s capital city Maputo. They will comprise a Well Woman Clinic and a Trauma Centre and Dr Solanki is confident that they will prove popular. It is not hard to understand why. Take Tanzania for example, a country of thirty eight million people. At present there is not a single neo-natal intensive care unit in the country. A baby born prematurely must either trust to fate or be flown to a neighbouring country. Maputo, a city of four million people, has just one private medical facility with twelve beds. Public hospitals are inadequate and white doctors, facing discrimination, are looking to emigrate – or work in private clinics.

Thanks to this, finding staff for Dr Solanki’s medical centres is not a problem. Meanwhile, the large majority of bills are covered by employer medical programs or private health insurance schemes, including one run by AMI itself. At a cost of $300 per month for a family of four, this it’s not cheap. But such are the alternatives that, for those that can afford it, this is a price worth paying.

A stock market star in the making?

So this looks like a promising business in the making, and the numbers stack up well. Dr Solanki told me that the centres cost about $3-$3.5m to build and equip, and then take in about $5-$5.5m of revenue each year. Of this, about $3m is spent on staff costs, medical supplies and other running costs, leaving an annual net income of $2m-$2.5m.

So if Dr Solanki can indeed build a chain of medical centres, then AMI could become a substantial company and a star of the stock market. As with any newly-listed company I want to watch how it develops for a few months before jumping in.

But this is very much a potential candidate for a future issue of Red Hot Penny Shares. If it is, I’ll let you know in much more detail.

Regards,

Tom Bulford
for The Penny Sleuth

P.S. I like it when companies push capital into their most promising ventures – even in the midst of a recession. For shareholders, it can be gut wrenching sometimes…but the prices on the ticker do not always accurately reflect the reality of tomorrow, but the panic of today. At Red Hot Penny Shares, I’m constantly sifting through the noise and clutter to bring my readers the stock market stars of tomorrow today. You can join my readers, and discover my favourite three “recession-busting” shares, by clicking here...

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Investment in Africa’s Health Industry

The Huge Opportunity in Africa’s Health Industry