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ORPEA

Analysis before buying or selling Orpea shares

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Elements to consider before selling or buying Orpea shares

Analysis N°1

First of all, we know that Orpea is considered a growth stock, but also has a defensive character that is very strongly linked to the real estate sector. It is therefore essential to analyse the health of this sector before taking a position.

Analysis N°2

The group's activities are also very sensitive to the level of public support for dependency care. Any changes and announcements in this regard will therefore be taken into account.

Analysis N°3

The development of the group's activities outside the European Union will also be closely monitored, particularly in China, where Orpea has already opened a first establishment in 2016. This very promising market will allow the group to consolidate its international positioning.

Analysis N°4

Orpea's acquisition capacity is also very high, at around 5,000 beds per year. Possible acquisitions, their cost and their envisaged profitability will therefore be closely monitored.

Analysis N°5

Of course, traders will keep a close eye on the achievement of the annual targets set by the group, particularly with regard to its profitability.

Analysis N°6

Finally, the Orpea group has often been the victim of rumours of a takeover bid for some time now, particularly with regard to a Chinese fund, Minsheng. These rumours are largely based on the partial withdrawal of the Marian family in favour of the Canadian pension fund CPPIB, which currently holds 15% of the capital.

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General presentation of Orpea

The Orpéa Group is a French company specialising in the sector of comprehensive dependency care. More specifically, Orpea is currently the leader in this sector in Europe. It is mainly active in the operation of retirement homes, follow-up care clinics and psychiatric clinics.

To go further, it should be noted that the Orpea group currently owns and operates a network of more than 935 establishments, i.e. the equivalent of 95,187 beds, including 354 establishments and 33,443 beds in France, 172 establishments and 17,990 beds in Germany, 84 establishments and 7,474 beds in Austria, 62 establishments and 10,428 beds in Spain, 61 establishments and 7,437 beds in Belgium, 60 establishments and 1,075 beds in the Netherlands, 37 establishments and 3,695 beds in Switzerland, 22 establishments and 2,745 beds in Poland, 22 establishments and 2,296 beds in Portugal, 21 establishments and 2,649 beds in the Czech Republic, 18 establishments and 2,752 beds in Brazil, 2 establishments and 365 beds in Luxembourg and even 1 establishment in China with 140 beds.

In total, the group has a real estate portfolio of more than 2,004,000 m2 with a total value of 5.6 billion euros.

With regard to the geographical distribution of the Orpea Group's revenues, we note that 59.6% of the company's turnover is currently generated in France and the Benelux countries, 35.4% in the rest of Europe, including 4.9% in the Iberian Peninsula, and 0.1% in the rest of the world.

To help you better understand the Orpea Group's challenges and the fundamental analysis events likely to influence its share price on the stock market, we now propose to take a look at the economic and financial history of this company, from its creation to the present day, with the key dates and the most significant events.

Orpea was founded in 1989 by Jean-Claude Marian as a specialist in retirement homes.

In 1999, Orpea created its subsidiary Clinea, which specialises in SSR and psychiatric clinics.

It is finally thanks to a specialisation in the sector of luxury retirement homes and by developing throughout the world that Orpéa will succeed in doing well despite a difficult start with a relatively stable growth rate of 12%.

Today, Orpea is the leader in the private operation of retirement homes with a turnover mainly generated by this activity. 63.9% of the profits come from the 352 establishments owned by the group. The rest of the turnover is generated by the operation of clinics and convalescent homes, as the group owns 45 establishments that provide psychiatric care, follow-up care, rehabilitation and functional readaptation services.

The Oprea group has also strongly developed its activity abroad with 166 establishments in Germany, 61 in Belgium, 58 in Austria, 27 in Switzerland, 25 in Spain, 16 in Italy, 7 in Poland and 3 in the Czech Republic.

It is also important to note that 32% of the company's shares are held by Mr Marian for a total of 400 million euros. Its director is Mr Yves Le Masne. Orpea also has subsidies allocated in Belgium to nursing homes, which enables it to maximise its profits.

In 2017, the Orpea Group acquired the Anavita Group in the Czech Republic, which specialises in nursing homes.

Analysis before buying or selling Orpea shares
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The major competitors of Orpea

The Orpea Group is currently one of the leaders in the retirement and nursing home sector in Europe. But it is not the only one operating in this very specific field and therefore has to deal with the threat of certain competitors.

Korian Group

In reality, only one competitor is strong enough today to put Orpea in the shade. This is, of course, the Korian group, with which Orpea is waging a merciless war for European market share. The two companies have very similar activities and more or less the same capacity. The turnover of the two groups is also very similar. However, Orpea has a larger market capitalisation than Korian, almost three times as large.

Noble Age

Another competitor is more recent, but has performed well on the stock market in recent years. This is the company Le Noble Age, which specialises in retirement homes.


The major partners of Orpea

In order to become one of the leaders in its sector, Orpea has implemented an important acquisition policy, but also relies on the creation of strategic alliances with other companies in various sectors of activity. We invite you to discover some examples of the latest partnerships set up by this company and their final goal.

Domidom

In 2012, the Orpea Group acquired a 30% stake in the human services company Domidom, which has no fewer than 60 branches. Thanks to this strategic partnership, each of these companies reaps certain benefits. Indeed, people receiving home help and requiring institutional care will be automatically redirected to establishments managed by Orpea, while patients leaving Orpea's specialised homes will be able to benefit from Domidom's services on their return home.

Cofinimmo

Also in 2012, Orpea joined forces with Cofinimmo in the context of the purchase of the premises of a residential care facility. The two groups had in fact signed a partnership agreement in 2011 concerning the creation of joint ventures whose purpose will be the acquisition, holding and management of health care real estate, the operation of which will be the exclusive responsibility of Orpea.

HNA Elderly Care Service

Finally, more recently, Orpea has joined forces with a Chinese specialist in elderly care, HNA Elderly Care Service. In 2016, the two companies set up a strategic partnership concerning the extension and long-term promotion of dementia care programmes launched by the Chinese public services and aimed at the Chinese elderly population.

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Positive factors for Orpea shares
The factors in favour of a rise in the Orpea share price:

Firstly, it should be noted that the main advantage of this company concerns its positioning in its sector of activity at European level. Indeed, Orpea is currently the leader in the care of dependent persons in Europe. The group has a portfolio of more than 730 establishments in various countries, which represents approximately 75,000 beds. It should be noted that almost 60% of these beds are located abroad and that the group is particularly well established in certain European countries such as Germany, Austria, Belgium, Spain and Switzerland in addition to France.

The Orpea group has also divided its activities into two distinct divisions which represent very interesting defensive sectors. The first division is of course the nursing homes or EHPAD, which generate the most turnover, and the second division is the rehabilitation and psychiatric clinics. This division into two divisions allows Orpea to show less exposure to risk.

Orpea is able to face the strong competition in this sector thanks to a very well thought-out strategy that is largely based on optimising the cost of rooms. Indeed, it should be remembered that in terms of turnover linked to care and dependency, the expenses of customers are covered by the health authorities. The group also bases a large part of its strategy on external growth, which it is increasingly developing.

Of course, the growth of this company should also be emphasised from a purely financial point of view. Indeed, the Orpea group has succeeded in doubling its turnover in a few years and intends to develop further, in particular thanks to more than 8,100 additional beds in reserve that will be built or restructured in the years to come, mainly outside France. This prospect thus offers excellent visibility on the growth of the company's revenues, which have been estimated at around 4 to 5% per year for the next few years.

Another of the Orpea Group's strengths is the high occupancy rate of its beds, particularly in the more mature countries such as France. In France, the occupancy rate of retirement homes is over 95% and this same occupancy rate is also very well maintained in other specialised centres and psychiatric centres.

The objectives set by the group in terms of holding its assets also represent a major asset for Orpea. The group plans to increase this holding rate to more than 50% compared to only 40% at present.

Finally, shareholders and investors also highly appreciated the successful succession of the group's founder who was replaced in 2017 by Philippe Charrier.

Negative factors for Orpea shares
The factors in favour of a drop in the Orpea share price:

Firstly, the development of the Orpea Group's activities is hampered by a number of different factors which are sometimes difficult to control. For example, real estate investments involve significant costs, as do salaries. In addition, this sector of activity is subject to certain regulatory constraints which are becoming increasingly important over time.

It is also known that the investors who have bet on the success of this group are particularly demanding in terms of quality and consistency of results. This puts additional pressure on the group.

The French market is one of the Orpea Group's main markets, where it is very well represented. However, this sector presents significant legal constraints, particularly with regard to the rates charged in certain establishments and more specifically in specialised centres or SSR. These constraints have a negative impact on the group's profitability.

Another disadvantage of this value is the high level of debt of the Orpea Group. This is indeed rather high, even though the vast majority of the group, i.e. more than 90%, is concerned with quality real estate assets that will be amortised in the future.

Finally, there is also a lack of profitability at international level compared to the profitability recorded in France. The countries in which Orpea's activities are least profitable include Italy, Poland and Austria.

As we have just seen, even if the defaults of this stock are few, their impact can be significant on the price of this stock. They should be carefully monitored before buying or selling these shares.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

What is the risk level of the Orpea share over one month, six months, three years or ten years?

If you are considering trading Orpea shares, it is interesting to know the risk, i.e. the level of uncertainty regarding its performance and over different periods. For example, the one-month risk is currently estimated at 104.53%, the six-month risk is 46.01%, the three-year risk is only 27.08% and the 10-year risk is only 27.25%.

What is Orpea's free float?

At the moment, i.e. at the beginning of 2020, the share of the Orpea Group's capital that is floating is 78.40%. As regards the distribution of the rest of the capital, we know that 14.50% is held by the CPPIB, 5% by the FFP Invest group, 2% by the Sofina SA group and that only 0.10% of its capital remains in treasury. Of course, this distribution is likely to change over time.

Who are the main shareholders of the Orpea Group?

Currently, the main shareholders of the Orpea Group are the Canada Pension Plan Investment Board with 14.5% of the capital, FFP SA with 5.05% of the capital, Comgest SA with 3.48% of the capital, The Vanguard Group with 2.35% of the capital, Sofina SA Private Equity with 2.01% of the capital, Norges bank Investment Management Ltd with 1.42% of the capital, Threadneedle Asset Management Ltd with 1.42% of the capital, Ostrum Asset Management SA with 1.33% of the capital, BlackRock Fund Advisors with 1.32% and Mirova SA Investment Management with 1.22%.

What are the different subsidiaries owned and operated by the Orpea Group?

The Orpea Group owns and operates several subsidiary companies in Europe and elsewhere. These include Clinea in France, Celenus Kliniken in Germany, the Medi-system group in Poland, the Residenz Gruppe Bremen group in Germany, the Senecura group in Austria, the Senevita group in Switzerland, the SilverCare group and Vitalis in Germany. Other companies are likely to be acquired by the group, which regularly carries out acquisition operations.

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