IHH Healthcare - CGS-CIMB Research 2020-06-29: Awaiting More Patient Volume


IHH Healthcare - Awaiting More Patient Volume

  • Excluding RM509m exceptional items, IHH Healthcare’s 1Q20 core net profit of RM189m was stable y-o-y but deemed below forecast as we expect a weaker 2Q20F.
  • 1Q20 saw a broad-based decline in revenue and patient load across all markets, slightly offset by higher revenue intensity and government relief.
  • While IHH Healthcare’s near-term share price could be weighed down by a lacklustre 2Q20F, we think investors should buy on weakness for longer-term recovery.

1Q20 net loss hit by exceptional items

  • IHH Healthcare (SGX:Q0F)’s reported 1Q20 net loss of RM320m was a miss against our/consensus expectations; this was attributed to a RM400m impairment loss on goodwill (over Global Hospitals), a RM80m FX loss on net borrowings and a RM60m FX loss upon substantive liquidation of its JV (Khubchandani Hospital). Excluding these exceptional items, IHH Healthcare would have recorded an underlying 1Q net profit of RM189m (+0.5% y-o-y), deemed below our full-year forecast (at 25%) as we now expect a weaker 2QFY20F.

Some resiliency in 1Q20 (revenue -2% y-o-y, net profit +0.5% y-o-y)

  • IHH Healthcare already saw a broad-based decline in revenue (3-16%) and inpatient admissions across all its markets, while average revenue intensity improved y-o-y in Singapore (+10.9%, due to better case mix) and Acibadem Holdings in Turkey (+14.8%, partly due to more complex cases and a c.13.1% price hike). EBITDA loss at its North Asian operations of RM67m was flattish q-o-q but widened y-o-y due to additional manpower.
  • Overall, IHH Healthcare’s 1Q20 EBITDA fell 10% on lower revenues and higher Covid-related costs, which were partially mitigated by government reliefs and grants. We note that Acibadem’s 1Q EBITDA would have increased 2% y-o-y on constant currency terms.

2Q20F likely to be worse off; potential pent up demand in 2H

  • We project 2Q20F to be significantly weaker on the back of travel restrictions implemented since late-Mar 20 and deferment of non-essential treatments. Within the domestic patient volume in 2Q, c.40% of cases were urgent, with the remaining equally split between elective and semi-elective cases (which started to see some recovery in Jun 20).
  • We also expect more telemedicine, screening and testing services, coupled with patients decanted from public hospitals, to offset some revenue loss.
  • We further trim our FY20F EPS by 9.8% on Covid-19 disruption and keep our FY21-22F EPS unchanged.

No change to our ADD call

NGOH Yi Sin CGS-CIMB Research | https://www.cgs-cimb.com 2020-06-29
SGX Stock Analyst Report ADD MAINTAIN ADD 6.250 SAME 6.250