Medcorp Ltd: A Picture of Health or a Financial Shell Game?

The ValueCritic
Jun 7
8 min read

At first glance, Medcorp Limited looks like a promising investment. With annual revenues north of TT$120M, a dominant market position in private healthcare, and profitability metrics that outshine local peers, the company enters public markets boasting impressive returns,

Segment wise, Medcorp’s revenues are diversified across critical services, reflecting a broad base of medical offerings that cater to both high acuity and routine care. Its inpatient services make up the largest slice of its income, underscoring the company's position as a comprehensive care provider handling surgical procedures, emergency admissions, and overnight patient care. Outpatient services contribute significantly as well, supporting day clinics, diagnostics, and chronic care management, while radiation and chemotherapy revenues showcase Medcorp’s entrenched role in oncology, a field with high demand and pricing power. This revenue mix provides a balanced income stream, which helps to buffer against cyclical patient volumes and changing insurance coverage patterns.

This structure highlights Medcorp’s positioning as a vertically integrated provider with specialization in oncology, surgical care, and chronic disease management. It also benefits from a 50% stake in Caribbean Heart Care Medcorp Limited, a joint venture that consistently contributes profits (TT$4.8M in 2024) and distributed TT$4.5M in dividends in recent years. Medcorp operates out of multiple facilities strategically located across Trinidad, including in Champs Fleurs and San Fernando, delivering specialist healthcare at scale. Their stated growth goal is to deepen offerings in oncology, cardiology, and neurosciences, segments where margins tend to be higher and private demand robust which is why in their notes they are pursuing this IPO. Through its IPO, the company intends to raise approximately TT$16.8M, of which TT$15M is expected to be deployed toward strategic growth initiatives such as expanding medical services and upgrading infrastructure. According to the prospectus, any remaining funds will be reserved for general corporate purposes, providing flexibility to respond to unforeseen opportunities or challenges in the healthcare sector. Their stated growth goal is to deepen offerings in oncology, cardiology, and neurosciences, segments where margins tend to be higher and private demand robust. Following the IPO, Medcorp’s shareholding structure is split between connected shareholders (62.58%) and existing minority plus new public shareholders (37.42%), as shown in the corporate diagram included in the prospectus. This layered corporate setup reflects a hybrid model of specialist operations and networked ownership across key healthcare assets.

From the outside, the story is polished: solid revenue, high margins, a clear niche, and a profitable joint venture. But behind the clean financials and growth rhetoric lies a tightly controlled structure, engineered not to invite public oversight or raise capital for innovation but to possibly extract tax benefits and entrench control. This is where the story shifts.

Red Flag 1: Inflated Returns via One-Off Waivers

Medcorp’s profits in 2023 and 2024 were significantly inflated by waiving insider debts rather than earning more from operations (the company in their notes recognized this). In 2023, the company waived TT$30.7M in dividends that had been owed to directors and shareholders since 2020. In 2024, an additional TT$25.9M owed to shareholders, likely for advances or reimbursements, was similarly waived. Instead of removing these balances quietly through equity adjustments, Medcorp recognized both waivers as income in its financial statements, inflating net profit without generating any real cash.

What makes this more concerning is how the waivers were structured. The TT$25.9M in 2024 was routed through a reduction in stated capital (which dropped from TT$33.4M to TT$7.48M), but instead of adjusting equity, it was recognized directly as profit. This accounting maneuver distorted key return metrics. ROE jumped to 92.6% in 2023 because the waived TT$30.7M dividend dramatically boosted income against a small equity base. ROA also appeared stronger than it was, since no new assets were added, just paper gains recycled through the income statement.

This wasn’t real earnings growth, it was accounting cleanup dressed up as profitability. Medcorp’s ROE was already unusually high before the waivers, hitting over 60% in 2022, largely because the company kept its equity base small through high dividend payouts and little reinvestment. That made even moderate profits look outsized. Then in 2023 and 2024, they waived insider debts and recorded them as income, boosting net profit while equity stayed low. This made ROE and ROA look better than they truly were. These waivers weren’t repayments or genuine restructuring, they were timing decisions meant to polish the financials ahead of the IPO. This distortion is measurable , Medcorp’s Earnings Quality Ratio (operating cash flow divided by net income) dropped to 0.74 in 2023 and 0.91 in 2024 well below the 1.0 benchmark, showing that reported profits were not backed by real cash generation.

Red Flag 2: Lease Back Loophole with Related Parties

Medcorp doesn’t own the buildings it operates from. Instead, it:

Pays over TT$11M/yr in rent to a related party, specifically to an entity under common control with its directors and pre-IPO shareholders
Reports a TT$114M right-of-use (ROU) asset on leased property from insiders
Owes TT$106M in lease liabilities tied to these properties

This structure allows Medcorp to transfer cash to insiders through rent, regardless of whether dividends are declared. In practice, this arrangement functions more like a disguised loan repayment to related parties, where long-term lease liabilities are established with insider owned property entities and then serviced annually through operating cash flows. These lease payments provide insiders with a steady return, shielded from dividend scrutiny or investor oversight. Because this rent is treated as an operating cost, it reduces taxable income while ensuring insiders are paid before public shareholders.

Moreover, the inflated ROU asset, which climbed from TT$30.9M in 2022 to TT$114.2M in 2024, artificially boosts Medcorp's total assets. This inflates the denominator in ROA calculations, creating the illusion of a more capital-intensive and asset-rich company, while masking how little actual asset growth occurred outside of this accounting treatment. At the same time, the matching lease liabilities ballooned from TT$23.8M to TT$106.5M over the same period, significantly worsening the company’s gearing ratio.

Year	ROU Asset (TT$)	Lease Liability (TT$)
2020	Not disclosed	35.4M
2021	Not disclosed	29.7M
2022	30.9M	23.8M
2023	125.6M	115.8M
2024	114.2M	106.5M

This sudden increase in lease exposure happened through a lease modification agreement with a related party and lacks the transparency or valuation rigor typically expected in independent property transactions.

Red Flag 3: Minimal Float, Maximum Tax Maneuvering

Under Section 16B of the Corporation Tax Act (as amended by the Finance Act), companies that list on the T&T SME Market are eligible for a 10 yr exemption from corporation tax, starting from the year of listing. To qualify, the company must raise at least 20% of its share capital through a public equity offering. This incentive is designed to encourage private companies to broaden ownership and access capital markets. However, Medcorp’s IPO structure, with only 4.47% of the company publicly floated, raises questions about whether it fulfills the intent or substance of this requirement. While the company may meet the technical thresholds under TTSE’s SME Market rules, the level of public participation appears minimal. The remainder of the company is held by connected parties or pre-IPO insiders. As of the IPO, 62.58% of the company remains held by Medcorp Holdings, while another 37% is attributed to 'Other Shareholders', a category not itemized or broken down in the prospectus. No disclosure is provided about whether these are institutional investors, family offices, or entities related to directors. This lack of transparency raises reasonable concerns that the 37% could include friendly or affiliated parties, which may impact the independence of public float.

While Medcorp may rely on TTSE’s revised SME rules to claim compliance, it remains unclear whether the company satisfies the tax exemption criteria under Section 16B of the Corporation Tax Act. That creates room for interpretation risk and potential regulatory scrutiny.

In contrast, Endeavour Holdings, another TTSE-listed company, took a similar route to access SME tax benefits but did so through the creation of a separate holding company, explicitly isolating real estate income and qualifying the operating arm. Medcorp’s model is more opaque: it retains operational control while distributing value through leasebacks and thin float, preserving tax sheltering without clearly satisfying public float conditions.

Meanwhile, the IPO only raised TT$16.8M, a small sum relative to Medcorp’s debt and lease obligations. The float was thin, control was preserved, and governance influence from minority investors remains negligible.

Red Flag 4: Weak Cash Flow and Careful Liquidity Management

Despite its strong revenue base, Medcorp’s cash generation profile is weakening. Operating cash flows have fallen sharply, from TT$43.9 million in 2022 to TT$24.7 million in 2024, despite relatively stable revenue. At the same time, annual outflows for lease repayments and debt service are increasing. Lease payments alone exceed TT$14 million annually, and when combined with interest and dividend payouts, they increasingly consume operational cash.

Liquidity stress is visible in Medcorp’s working capital position. The quick ratio hovers just above 1.0, indicating that short-term obligations nearly equal liquid assets. More concerning is that Medcorp’s cash conversion cycle (CCC), while technically negative (sometimes a good sign), is not a sign of efficiency. Its receivables turnover has slowed to 4.3x in 2024 (DSO ~85 days), while inventory turnover sits at 8.0x (DIO ~46 days). Meanwhile, payables turnover has dropped to 2.57x (DPO ~142 days), meaning Medcorp delays supplier payments significantly. This extended DPO gives the illusion of working capital strength but really reflects reliance on supplier credit to plug liquidity gaps.

In short, the negative CCC arises not from operational agility but from financial pressure, Medcorp is slow to collect and slower to pay, something typical in Caribbean & Public Health Care. However, it is not a sign of strength, it’s a warning signal. Furthermore, while depreciation expenses are rising (TT$16.6M in 2024), capital expenditure remains modest at just TT$4.6M, suggesting underinvestment in infrastructure. The resulting gap indicates that the company is not replenishing or upgrading assets at a sustainable rate which can affect future flows.

Medcorp is not a distressed company, it is a well manicured financial construct that is profitable. But that’s precisely the issue. Its financial model appears engineered not to build longterm investor value, but to capitalize on short-term regulatory and financial advantages.

Extract cash via rent: TT$10 to14M in annual lease payments flow to insider-controlled entities through long-term occupancy agreements, functioning more like debt repayments than standard rent. Insiders already extract economic value via leasing arrangements, salaries and professional fees before a portion of the after tax profit is distributed to shareholders.
Capture tax exemptions: By technically listing on the SME Market while floating only 4.47% of its shares, Medcorp positions itself to claim a 10yr corporate tax holiday. Yet, it leaves compliance questions unanswered and risks regulatory scrutiny.
Maintain insider control: Despite being a public company, over 62% remains in the hands of connected shareholders. The other 37% is unattributed in the prospectus, raising concerns about whether true public ownership or independent oversight even exists.

In other words, what appears to be a growth oriented healthcare IPO is more accurately a strategic shell built to optimize cash flow to insiders, minimize taxes, and avoid dilution of control. The company and directors must be commended for listing on the SME. SME growth and development is key to the country's success but outside investors and minority shareholders must ask, are you buying into a healthcare growth story, or into a tax vehicle with surgical accounting? And what are the risks for such an investment?