IHH Healthcare - Maybank Kim Eng 2021-03-01: To Double ROE In 5 Years

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IHH HEALTHCARE BERHAD (SGX:Q0F)

IHH Healthcare - To Double ROE In 5 Years

Trading below mean valuation; maintain BUY

• IHH Healthcare (SGX:Q0F)'s 4Q20 results was above expectations on higher margins. We think its margins could sustain as IHH Healthcare targets to double its ROE (FY20: 3%) in 5 years through deepening its cluster strategy and optimising its cost.
• We raise our IHH Healthcare's FY21-22E earnings forecast by 10% as we raise our EBITDA margin by 1-ppt; we also introduce our FY23E valuation.
• Rolling forward valuation to end-FY22E, our SOP-based target price for IHH Healthcare is raised to MYR6.30 (+6%).
• IHH Healthcare trades at 12M forward EV/EBITDA of 15x, below its 5-year mean of 20x. Maintain BUY.

4Q20 results above expectations

• Excluding the exceptional items (totalling MYR48m), IHH Healthcare's 4Q20 core PATMI was MYR372m (+56% q-o-q, +28% y-o-y). This brought IHH Healthcare's FY20 core PATMI to MYR715m (-22% y-o-y) and made up 119%/139% of our/street’s full-year estimates.
• A first and final dividend of RM0.04 per share was declared (flattish y-o-y).

4Q20: Patient volume recovering, margin expansion

• Key takeaways from IHH Healthcare's 4Q20 results:
  1. Singapore - EBITDA margin increased to 43% (+7.8-ppt q-o-q) on higher revenue (+7% q-o-q), cost cutting measures and government grant (to cease in FY21). Excluding the government grant, EBITDA margin would still be strong at 40% (+5.4-ppt q-o-q, +2.2-ppt y-o-y);
  2. Acibadem – EBITDA margin increased to 29% (+4.6-ppt q-o-q) on higher revenue (+5% q-o-q) and ramp up of its European operations. Medical tourists accounted for ~19% of revenue, slightly higher than pre-COVID-19 level;
  3. Malaysia – Inpatient volume fell 6% q-o-q due to the lockdown from mid-Nov 20. However, EBITDA margin was flattish q-o-q given the higher revenue intensity (+5% q-o-q);
  4. India – EBITDA margin improved to 15% (+1.3-ppt q-o-q);
  5. GHK, Gleneagles Chengdu – EBITDA loss was stable and GHK may achieve EBITDA breakeven in FY21. Gleneagles Shanghai would open by early-FY22.

Expecting more patients to return

• In 4Q20, COVID-19-related services accounted for ~11% of IHH Healthcare’s revenue. As COVID-19 cases ease, management expects more patients to return and offset the lower COVID-19-related services.
• IHH Healthcare’s inpatient volume in 4Q20 was still ~20% lower than pre-COVID-19 level.
• 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/ 2021-03-01

SGX Stock Analyst Report BUY MAINTAIN BUY 2.07 UP 1.960