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Korian: An Undervalued Long-Term Story

Jun. 10, 2020 5:37 PM ETClariane SE (KRNMF)ORPEF6 Comments
Stanislas Capital profile picture
Stanislas Capital


  • The long-term care industry is poised to grow for decades and is protected by significant barriers to entry.
  • Unfounded fears resulting from the market sell-off and the pandemic have depressed valuations.
  • The business is still in good shape and very well positioned for long-term growth.
  • A deep healthcare property analysis suggests that Korian’s real estate portfolio is extremely undervalued.
  • Valuations fail to properly reflect business prospects.

Investment thesis overview

Korian (OTC:KRMDF) share price has been severely hit during the market sell-off. Investors are worried about the impact of Covid-19 on the company short-term profitability as well as a potential negative structural impact on future profitability. Indeed, during the pandemic, Korian incurred additional expenses to purchase medical supplies such as masks, hydroalcoholic gels, tests and hired more staff. On top of that, the company occupancy rate declined as the company was not able to accept new patients to fill the increasing number of empty rooms in nursing homes and had to face lower business activity in clinics (when they were still opened). At the same time, some investors feared that the occupancy rate of nursing homes will become structurally lower because of the bad media coverage and that all these extra-costs will persist over the coming years.

We believe these fears are the result of a poor business understanding. Indeed, while the company faced additional medical expenses and will likely incur them in the foreseeable future, most of those expenses will be covered by governments. Indeed, most European governments reimburse care and medical expenses (see page 42 for more details). Besides, the occupancy rate will quickly normalize as clinics are authorized to reopen, surgeries restart in hospitals and nursing homes are able to welcome new patients. The poor media coverage will not change the demand for nursing homes. In general, patients do not wish to go in a nursing home; they just do not have the choice as their physical/mental conditions require special infrastructures and care that prevent them to stay at home. Moreover, given the strong demand/supply imbalance, it is almost impossible that occupancy rate will become structurally lower.

Despite the recent rally, Korian is still trading at depressed valuations. After valuing the real estate and the operating

This article was written by

Stanislas Capital profile picture
Long-term investor focusing on quality companies.Coverage of US and European companies. The idea is to develop very comprehensive research reports that will be usefull when reviewing the investment case some years later.

Analyst’s Disclosure: I am/we are long KRMDF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (6)

Great article, thanks!

Are there any reasons why Oprea should trade at a higher multiple than Korian?
Stanislas Capital profile picture
Orpea has a better operational track record. Korian has been built over many acquisitions which have been poorly integrated, leading to weaker financial performance than Orpea. In the last couple of years, korian has improved its operations, reducing the gap with Orpea.
Stanislas Capital profile picture
Orpea did report its H1 results. Link below:


This comment strengthens our view:

"Business across all facilities has picked up significantly since mid-June:– the improvement in occupancy rates at post-acute and rehabilitation hospitals and psychiatric hospitals has been faster than expected, as they have almost returned to pre-Covid levels in just two months;– the momentum of new admissions for nursing homes is also strong, and occupancy rates in most countries are expected to return to pre-pandemic levels by the end of 2020."
Forsitan profile picture
Very good article. Many thanks. Have you taken a look at CIR (listed in Milan)? Through CIR you can buy KOS (a peer of Korian) at what looks a good price because of holding discount.
Stanislas Capital profile picture
Thanks for your comment. I did not look at CIR. To be honest, I did not know this company.
Stanislas Capital profile picture
Cofinimmo purchased 6 new healthcare properties at a 4.5% yield in Belgium for roughly € 105M on 06/10/2020. It confirms the value embedded in Korian's real estate portfolio

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