IHH Healthcare - Maybank Kim Eng 2020-04-02: Travel Bans And Lockdowns At Key Markets

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IHH HEALTHCARE BERHAD (SGX:Q0F)

IHH Healthcare - Travel Bans And Lockdowns At Key Markets

Patient volume to recover post-COVID 19; BUY

• With the travel bans/lockdowns being imposed at its key markets, 2Q20 could be IHH Healthcare (SGX:Q0F)’s worst quarter in FY20E, but may recover in 3Q20 as travel ban/lockdowns are lifted.
• We cut our FY20E EPS by 17% to impute for the COVID-19 impact and also trim FY21-22E EPS by 9%/5% on a potential slower economy. Our SOP-based Target Price is reduced to MYR6.05 (-4%).
• Maintain BUY for its relative resiliency against a potential slower global economy.
• IHH Healthcare trades at 12M fwd EV/EBITDA of 18.5x (-1SD to 5-year mean: 18x).

Singapore: Bans entry of foreigners

• Effective 24th Mar, Singapore bans foreigners into the country, with no end date mentioned so far. Though foreign patients which are already at Singapore can still be treated at its hospitals, the lack of new foreign patients to replenish the old foreign patients would eventually result in near-zero foreign patient revenue to its Singapore unit.
• Singapore is IHH Healthcare’s largest market (89% of group PATMI in FY19) and foreign patients accounted for c.25% of Singapore’s revenue in FY19. Some of the non-critical COVID-19 patients have been transferred to its hospitals (from public), but we believe margins from this could be low to IHH Healthcare.

Malaysia: MCO imposed, Turkey: Lockdown looms

• Malaysia (FY19: 38% of PATMI) would also see a sharp drop in its patient volume during the 1-month Movement Control Order (18 Mar-15 Apr). As an indication, KPJ’s bed occupancy has plunged to 30% (FY19: 67%) after the MCO came into effect.
• Meanwhile, Turkey (FY19: 11% of PATMI) has already urged its locals to observe “voluntary quarantine” and may consider a full lockdown. These would lead to a drop in both local and foreign patient volume. In FY19, foreign patient accounted for 6%/16% of Malaysia/Turkey’s revenue.

Lowering patient volume assumptions

• We cut our FY20-22E EPS by 17%/9%/5% as we lower our patient volume and EBITDA margin assumptions for our key markets. Margins could decline as it loses its high-margin foreign patients.
• See IHH Healthcare Share Price; IHH Healthcare Target Price; IHH Healthcare Analyst Reports; IHH Healthcare Dividend History; IHH Healthcare Announcements; IHH Healthcare Latest News.

Lee Yen Ling Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-04-02

SGX Stock Analyst Report BUY MAINTAIN BUY 6.05 DOWN 6.300