Too much is too much, for financial analyst Christophe-Raphaël Ganet, of the private bank Oddo BHF. From today, he no longer advises the purchase of Korian on the stock market (his advice goes from “outperformance” to “neutral”, with a price target reduced from 35 to 20 euros) and lowers its price again target on Orpea (board changed to “neutral” in disaster in January), from 43.5 to 26.7 euros.
“The worst-case scenario is written every week”there are “constant threats” on the managers of Ehpad Orpea and Korian since the book-investigation The Gravediggers by journalist Victor Castanet came out almost five months ago, revealing the shortcomings at Orpea and the abuse suffered by the residents. The share price of the world leader in retirement homes has collapsed by 75% since the start of the year and that of its competitor Korian by just over 40%; their shares are down another 5% today. the “media deluge” targets Orpea more than Korian which, at least, we note at Oddo BHF, “continues to communicate to distinguish itself from Orpea. » However, while almost every week brings its share of new critical information concerning the sector, the breach of trust is only growing.
” This weeksummarizes the analyst, we subsequently learned that a complaint from families of residents had been filed against Korian and that, with regard to Orpea, the summary of the report of its external auditors (Grant Thornton and Alvarez&Marshall) mandated by him had been published, to assess and shed light on the allegations made against the group since February and that [le groupe] was the subject of a search following the subjects raised by the joint mission of the General Inspectorate of Social Affairs and the General Inspectorate of Finance. »
“Several more quarters” under pressure
Many incriminating allegations against Orpea are confirmed by the independent auditors’ report. “It appears that there are surpluses in the allocations received from the authorities (under consumption of the allocations received from the public authorities), the surpluses thus generated may have contributed to the group’s result, [ainsi que] the practice of end-of-year discounts, with certain suppliers financed by public grants and not communicated to the authorities [et] that remuneration has been paid, with the approval of the former CEO or members of his team, to third-party business contributors, [et enfin que] capital partnerships or economic operations, in particular on the occasion of external growth operations abroad, have been concluded, or may have had the effect or purpose of unduly favoring third parties, in particular employees and/or former employees employees, or partner companies, without obvious justification. »
These shortcomings have prompted the State to take the decision to increase controls, which will have a financial impact on the managers of Ehpad who, to begin with, will have to hire staff.. “All establishments will be checked by the end of 2025 (compared to 10% of nursing homes checked each year, currently between 5 and 50 checks per region and per year, i.e. 850 per year for just over 7,400 nursing homes)explains Christophe-Raphaël Ganet. For this, a hundred agents will be recruited by the Regional Health Agencies. One can imagine the creation of an independent evaluation agency, close to the German MDK, largely financed by operators or a specific tax, and responsible for rating nursing homes. »
Korian is the target of complaints for “manslaughter”, filed before a dozen prosecutors, in several regions. These complaints against X would be initiated by about twenty families of residents, for acts of “endangering the life of others”, “non-assistance to person in danger” and “manslaughter”. They were filed in Aix-en-Provence, Bobigny, Bourges, Le Mans, Marseille, Nantes, Niort, Paris, Pau and Versailles. This is the first major class action against Korian. The Oddo BHF analyst believes that ” Korian’s practices and organization were changed with the arrival of Sophie Boissard in 2016, [mais] the fact remains that the shortage of nurses and, more broadly, of healthcare personnel can sometimes lead to quality shortcomings. »
In terms of “value hierarchy”, Korian is above Orpea. The group “has embarked on a profound transformation (real estate policy, internationalization, restructuring of part of the portfolio, effort to engage with employees, CSR objectives, remuneration of the CEO based on ESG criteria, more balanced governance than Orpea before the scandals) . » The floating capital of Korian (62%), like that of Orpea (80%), makes a takeover possible, but the media pressure of the moment, its reputational impact, are more likely to dissuade, for the moment, any potential buyer. At Oddo BHF, we believe it is “quite likely that stock market prices will remain several more quarters below fundamental levels, the time to reassure in terms of financing and real estate valuations, that the market better understands the rebasing of margins, that the regulatory context stabilizes, that the environment media and legal settles. »