IHH Healthcare - CGS-CIMB Research 2021-03-01: Closing The Year On Firmer Footing


IHH Healthcare - Closing The Year On Firmer Footing

  • IHH Healthcare's 4Q20 core PATMI (RM371.8m) took FY20 core PATMI to RM715.3m, above our/consensus forecasts, aided by better EBITDA margins and govt grants.
  • We like that occupancies are improving. Management reiterated its Refreshed Strategy which we think will help drive earnings growth.
  • Reiterate ADD on IHH Healthcare with a slightly lower SOP-based target price of RM6.91. The stock is trading at more than 1 s.d. below its 5-year historical mean.

IHH's FY20 core net profit down by only 22%, aided by 4Q20 performance

  • IHH Healthcare (SGX:Q0F)'s 4Q20 topline grew 7% q-o-q as inpatient volumes continued to improve across various markets, leading to a smaller y-o-y topline decline of 1.8% (vs. -7% y-o-y in 3Q20).
  • Despite the y-o-y topline decline, higher 4Q20 EBITDA margin of 27.7% (vs. 4Q19’s 23.5%), led by partly by strong margins in Acibadem (4Q20: ~28.9% vs 3Q20: ~24.3%) and receipt of government grants and reliefs, took 4Q20 EBITDA to RM1.04bn (+15.5% y-o-y).
  • The robust 4Q20 EBITDA and lower net interest expense (due to lower borrowing costs and loan quantum) led to IHH Healthcare's 4Q20 core PATMI growing ~28% y-o-y to RM371.8m. FY20 core net profit of RM715.3m (137%/134% of our/consensus forecast) was down 22% from FY19’s ~RM921m.
  • IHH Healthcare announced a final dividend of RM0.04 per share, above our expected RM0.024.

Majority of average occupancies up in 4Q20

  • IHH Healthcare guided average 4Q20 occupancies improved across the board — SG: 55% (3Q20: 52%); Turkey/Europe/CEE: 75% (3Q20: 65%); India: 64% (3Q20: 59%) — except for Malaysia which reinstated a Conditional Movement Control Order in Nov 20 and saw occupancy fall to 45% (3Q20: 50%).
  • Management sounded optimistic of a continued recovery in most of its markets. While medical tourism remains curtailed in most places, the emergence of a vaccine in FY21F may continue to boost occupancies, in our view.

Still embarking on “Refreshed Strategy”

  • IHH Healthcare's management reiterated its Refreshed Strategy during the analyst briefing, which includes aims to
    1. push Singapore as a “super” specialisation hub;
    2. grow via a cluster strategy in Malaysia and Turkey/Europe/CEE;
    3. drive cost savings and ramp-up productivity in India and
    4. reach EBITDA breakeven at Gleneagles Hong Kong Hospital soon.
  • We keep our IHH Healthcare's FY21-22F earnings forecast relatively unchanged (stronger than FY19 earnings partly on higher capacity in Malaysia, better margins in Acibadem, Turkey and lower losses in North Asia) despite the strong 4Q20, as we remain conservative and believe that government grants will taper off in FY21F and COVID-19 volatilities could still impact FY21F.

Reiterate ADD

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2021-03-01
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