IHH Healthcare - CGS-CIMB Research 2020-03-24: Foreign Patients Kept At Bay


IHH Healthcare - Foreign Patients Kept At Bay

  • We expect global travel restrictions, and Singapore MOH’s latest advisory to private healthcare sector on foreign patients, to weigh on IHH Healthcare’s patient load.
  • We cut FY20-22F EPS by 5.9-20.0% to factor in loss of medical tourism and possible macro slowdown. Faster Covid-19 recovery is a key catalyst.
  • Reiterate ADD on this long-term premium healthcare play, which currently trades beneath -1 s.d. of its historical 7-year mean.

Biggest market impacted by MOH’s new directive

  • Following the closure of Singapore’s borders to all short-term visitors effective from 24 Mar 2020, the Ministry of Health (MOH) has instructed all doctors in the public and private healthcare sector to
    1. immediately stop or defer accepting new foreign patients who do not reside in Singapore, and
    2. encourage their current foreign patients to seek continued care in their home countries.
  • MOH also has plans to further collaborate with private hospitals like IHH Healthcare (SGX:Q0F) to free up capacity in the public sector for more serious Covid- 19 cases. We expect significant impact on IHH Healthcare’s operations in Singapore, which is its biggest market, accounting for 29% and 44% of its FY19 revenue and EBITDA respectively.
  • We estimate that foreign patients form c.30% of IHH's Singapore patient volume.

Travel restrictions elsewhere keeping medical travellers at home

  • Like Singapore, IHH Healthcare’s other major markets have enforced similar travel restrictions and city lockdowns, possibly resulting in lower patient footfall from both domestic patients (as they defer non-critical procedures) and medical tourists (which contribute to less than 10% of total revenue in the respective countries); these countries are Malaysia (20% of FYF19 EBITDA), Turkey (21%) and India (11%).
  • We think Gleneagles Hong Kong (GHK) will be less affected, given the earlier negative impact from HK protests on its Chinese patient load, and it could gain from local patients switching from public hospitals.
  • A bright spot amid the widening Covid-19 spread is higher demand for lab testing and diagnostic services, which is likely to benefit IHH Healthcare’s Parkway Laboratory Services (Singapore’s first and only private laboratory to provide in-house testing for Covid-19), as well as Fortis’s SRL Diagnostics business.

Reiterate ADD, but with lower Target Price and EPS

NGOH Yi Sin CGS-CIMB Research | https://www.cgs-cimb.com 2020-03-24
SGX Stock Analyst Report ADD MAINTAIN ADD 5.90 DOWN 6.260