IHH Healthcare - Maybank Kim Eng 2019-02-28: Positive Outlook

IHH HEALTHCARE BERHAD (SGX:Q0F)

IHH Healthcare - Positive Outlook

IHH HEALTHCARE BERHAD (SGX:Q0F)'s 4Q18 results were above expectations on strong deliveries at all markets and FX gains. Earnings momentum should sustain on the swift turnaround of its newly-acquired Fortis and reduced losses at GHK.
We raised our FY19-20F EPS by 18% p.a. and introduce FY21F. Consequently, our SOP-based Target Price is raised to MYR6.90 (+7%). BUY.

Excluding the one-offs (total positive MYR168m), IHH's 4Q18 core net profit was MYR342m (+11% q-o-q, +88% y-o-y) which brought FY18 core net profit to MYR1.03b (+73% y-o-y).
Results were above expectations (115%/128% of our/consensus FY18E), due to stronger-than-expected earnings from Turkey and FX gains from its USD-denominated cash balance (MYR45m), which IHH usually treats as an operating item.
A first and final DPS of 3sen was declared, as expected (unchanged y-o-y).

On a q-o-q basis, Singapore and Malaysia registered EBITDA growth of 6% and 11% respectively, driven by a higher SGD/MYR (for Singapore) and higher inpatient volume (for Malaysia).
Meanwhile, Turkey registered a strong EBITDA growth of 29% q-o-q on the higher patient volume/revenue intensity and the ramping up of Altunizade.
Similarly, losses at North Asia also reduced slightly as GHK’s occupancy rate ramped up to 60% in 4Q18 (3Q18: 50%).
Lastly, Fortis (FORH IN) contributed 1.5 month of earnings with positive EBITDA of MYR13m and PATMI of MYR2m.

We raised our FY19-20F EPS by 18% p.a. as we:
1. update for FY18 operating metrics;
2. delay the bulk of the start-up loss for Gleneages Shanghai to FY21 (from FY19) as the new hospital will only commence ops in end-FY20;
3. reduce our projected loss for Fortis to nil in FY19 and raise our projected earnings in FY20.
The sharp turnaround of Fortis is premised on the substantial savings on rental fee and management’s various initiatives. The open offer (for the 26% stake in Fortis) is pending a court hearing on 14th Mar 2019. We have assumed for IHH to own a 57% stake in Fortis in our earnings model and SOP valuation.

Lee Yen Ling Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-02-28

SGX Stock Analyst Report BUY MAINTAIN BUY 6.90 UP 6.450