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

IHH HEALTHCARE BERHAD (SGX:Q0F) | SGinvestors.io IHH HEALTHCARE BERHAD (SGX:Q0F)

IHH Healthcare - Positive Outlook

Fortis surprises on the upside; maintain BUY

  • 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.



Above expectations

  • 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).


4Q18: Earnings growth across all markets

  • 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.


Raising EPS forecasts

  • 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



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