An Under-the-Radar Opportunity: Investing in Optima Health
2x potential in a safe industry
Investment Report
Today in Undervalued and Undercovered we present a company without coverage we will be the first research plaform to publish a thesis on this company, I hope you enjoy it.
Key points:
Market Leader with Ambitious Growth Plans: Optima Health holds a dominant 10% market share in the UK occupational health sector and aims to expand to 25% through organic growth and strategic acquisitions in a highly fragmented market.
Under-the-Radar Investment Opportunity: Following a rapid demerger from Marlowe and limited investor outreach, Optima Health remains largely undiscovered with no current analyst coverage, presenting a unique opportunity as the stock enters a phase of price discovery.
Favorable Market Trends: The company is poised to capitalize on macro trends such as an aging and progressively unhealthy population, increasing strain on the NHS, and regulations driving outsourcing of occupational health services.
Institutional Investor Confidence: Substantial investments from institutional buyers in the first week post-demerger indicate strong market confidence in the company's strategic direction and growth prospects.
1. Introduction:
In the dynamic UK occupational health sector, Optima Health swiftly completed its demerger from Marlowe. With limited resources for investor outreach (they don’t have any investor presentations or quarterly reports yet), the stock remains largely uncovered. This report is the first to be published about the company; due to this, we think that the company could be entering into a phase of price discovery. Specializing in technology-enabled solutions for corporate health and well-being, Optima Health boasts a dominant 10% market share, with strategic ambitions to expand to 25% through organic growth and acquisitions in a highly fragmented market.
The company is strategically positioned to leverage the growing $1.2 billion market, projected to increase to $1.4 billion by 2028. It is particularly set to benefit from the expanding talk therapy sector, a $750 million market growing at a 20% CAGR. Despite recent revenue declines and anticipated challenges in FY 2025, Optima Health has demonstrated margin improvements, underscoring its resilience and potential for recovery.
The first week post-demerger saw significant trading activity, with substantial investments from institutional buyers, signaling strong market confidence. However, Optima Health faces challenges in investor communications, with crucial financial data not prominently shared but instead embedded within admission documents and associated reports. This communication gap presents a unique investment opportunity for those ready to explore deeper into Optima Health’s financial landscape and strategic initiatives.
As you can see the demerger happened fast leaving no time for promoting the new listed entity. Marlowe has been stripping some of their assets as their management is trying to maximize shareholder value simplifying their structure, Optima Health traded down 30% in the first trading day which was followed by huge buys from institutional investors.
2. Business model:
Optima Health stands as a leading provider of technology-enabled corporate health and well-being solutions within the UK's occupational health sector. With a client base exceeding 2,000 organizations, the company serves a wide array of businesses, including around 170 clients with contracts worth more than £100,000. However, a notable aspect of their revenue structure is that their largest client contributes over 10% of the total revenue. The recent loss of some significant contracts has led to a decline in organic revenues for the current year and is expected to impact 2025 as well.
The company operates in a market where the economic cost of ill-health-related absence and lost productivity among working-age individuals in the UK was estimated at approximately £150 billion per annum in 2022, equivalent to 7% of the UK's GDP. Sickness absence has reached its highest level since 2005, with 185.6 million days lost—averaging 5.7 days per worker annually. Employers are increasingly recognizing their crucial role in promoting employee health and well-being, shifting their healthcare spending toward proactive early intervention and prevention strategies. This shift is motivated by strong returns on investment and the need to manage health risks, reduce absence, and provide effective rehabilitation pathways, especially as NHS waiting lists have grown by over 3 million people since the pre-pandemic period, reaching approximately 7.6 million as of December 2023.
Optima Health leverages an integrated delivery model with nationwide coverage across the UK, facilitating services both remotely and on-site. The company's infrastructure includes four core hubs, a network of 48 occupational health clinics, and over 30 mobile clinic solutions. Services are delivered by a team of over 800 directly employed clinicians across various disciplines, supplemented by more than 1,000 subcontracted associate clinicians. This extensive network provides resource flexibility to meet diverse client needs.
Significant investment in digitalization—over £15 million in combined capital and operational expenditure in the past seven years—underpins the company's service delivery. Optima Health utilizes proprietary digital tools such as workflow systems, case management, clinical intervention platforms, and customer referral systems through its myOH platform. These technologies enable efficient, scalable service delivery and support future growth initiatives. Additionally, the company's exclusive and clinically validated digital triage and well-being tools reduce the necessity for clinical interventions, promoting self-management and self-referral options for clients.
Through these advanced tools and platforms, Optima Health accesses high-value data that can be leveraged to develop proactive, preventive, and predictive services. The potential integration of artificial intelligence and predictive modeling enhances their ability to address client needs effectively. With a focus on technology investment, data analytics, and an expanding network, Optima Health is well-positioned to capitalize on acquisition opportunities in a highly fragmented market, driving growth and increasing its market share in the long term.