If you focus on the financial data alone, few listed companies can compete with the kind of consistent double digit growth rates and profit margins notched up by Integrated Diagnostics Holdings (LON:IDHC) - yet this company trades on just 13.8x forecast earnings and is expected to pay out a generous 5.7% dividend.

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So why the modest valuation for what appears to be a growing, cash generative healthcare provider in expanding markets?

A part of the answer might be to do with those expanding markets - IDH operates in Egypt and across certain other North African countries. They come with increased opportunities, but also with increased risk. IDH is not your typical London-listed company.

Investors are wary of overseas listings and the group’s abrupt change of auditor only adds to that dubious impression.

But the growing disconnect between financial execution and valuation appears to present an opportunity to buy into a high quality operator exposed to structural growth markets. That’s if you can get over the overseas listing, jurisdiction risk, and abrupt change of auditor, of course. So is this company being unfairly shunned, or has it been left alone for good reason?

IDH was pitched to the Investment Club on July 13th at a share price of $1.19.

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Bull points: Double digit top line and bottom line growth over many years; double digit returns on capital and profit margins; net cash with great cash conversion; structural growth drivers in growing, fragmented markets; dominant market position in Egypt with economies of scale and barriers to entry; accredited brands give it pricing power; capital-light expansion model.

Bear points: emerging market volatility and geography risk; short listed history and limited analyst coverage; recent abrupt change in auditor; temporary Covid boost to diagnostics trade; products and services could become lower margin and more commodity-like in future.


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About the Stock:

Integrated Diagnostics Holdings (LON:IDHC) trades in the Healthcare segment as part of the Healthcare Providers & Services industry group.

It listed on the LSE Main Market in 2015 and listed in Egypt (EGX) in May, 2021. It is an Egyptian company with headquarters in Jersey and expanding operations in the Middle East and North Africa (MENA).

The market cap is around £513m, although shares are thinly traded and…

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