IHH HEALTHCARE BERHAD (SGX:Q0F)
IHH Healthcare - On The Frontlines Of The Virus Fight
- We think IHH Healthcare (SGX:Q0F) is well positioned for structural trends in telemedicine and diagnostic testing, which are some of the new opportunities amid Covid-19.
- Medical tourism has been severely affected but could see some improvement from economy reopening and “safe travel” arrangements.
- Reiterate ADD with a higher SOP-based Target Price of RM6.25 on easing lockdown and healthcare demand recovery.
Launches telemedicine in all its key markets
- While Covid-19 has severely disrupted medical tourism for some international private hospitals like IHH Healthcare, it has also created opportunities for telemedicine and diagnostic testing, where the group continues to invest.
- Since 2019, IHH Healthcare has set aside S$80m for innovative projects such as remote care, and has rolled out a global telemedicine initiative. While the adoption remains low in Singapore and Malaysia and is unlikely to be a significant earnings contributor in the near term, IHH Healthcare has seen better traction in its developing markets like India and Turkey.
Increased diagnostic testing could be a near-term driver
- We expect the demand for Covid-19 testing to stay elevated after lockdown easing and economy reopening, as governments extend their population testing and impose tighter screening requirements for those who travel. This could benefit IHH Healthcare given that its ParkwayHealth lab is the only private facility in Singapore accredited by the Ministry of Health (MOH) to process swab tests, while some of its Malaysia-based hospitals also offer drive-through screening services. Furthermore, its Fortis Hospitals in India have the capability to test for Covid-19 via its SRL Diagnostics subsidiary.
Economy reopening, safe travel could be other catalysts
- More economies will be reopening in phases in Jun 20, and we forecast some recovery in international travel demand as Singapore plans to introduce its current travel bubbles with China to other countries. While such travel is currently allowed under strict rules, we think this could be extended for medical tourism purposes, especially for more critical cases. When this happens, we believe it could catalyse faster recovery for IHH Healthcare, with foreign patients forming c.10% of its total patient load across its five markets in 2019.
Reiterate ADD with higher Target Price of RM6.25
- We cut our FY20F EPS by 8.0% to factor in slower completion of the Prince Court acquisition (previously1Q20, now by 3Q20F) and lira depreciation against ringgit, and keep our FY21-22F EPS largely unchanged. We still like IHH Healthcare as a long-term premium healthcare play and its trading valuation of 16.7x FY21F EV/EBITDA (1 s.d. below historical mean).
- Retain ADD with a higher SOP-based Target Price of RM6.25, pegged to a smaller conglomerate discount (5% from 10% previously) on the back of economies reopening and demand recovery.
- See IHH Healthcare Share Price; IHH Healthcare Target Price; IHH Healthcare Analyst Reports; IHH Healthcare Dividend History; IHH Healthcare Announcements; IHH Healthcare Latest News.
- Key downside risks: virus resurgence, and overhang from delayed IHH Healthcare/Fortis court proceedings.
NGOH Yi Sin
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-06-10
SGX Stock
Analyst Report
6.25
UP
5.900
