IHH Healthcare - CGS-CIMB Research 2021-08-27: Looking Better

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IHH HEALTHCARE BERHAD (SGX:Q0F)

IHH Healthcare - Looking Better

• IHH Healthcare's 1H21 y-o-y EBITDA growth was strong, spurred by a better EBITDA margin, on the return of elective procedures and aided by COVID-19 related services.
• We like that IHH Healthcare’s revenue intensity and occupancy improved across the board q-o-q and HK Gleneagles achieved EBITDA breakeven in May 2021.
• Reiterate ADD with an unchanged SOP-based target price of RM6.91.

IHH Healthcare reported strong 1H2021 on stronger patient volume and revenue intensity

• IHH Healthcare (SGX:Q0F)’s 1HFY21 revenue increased 34% and EBITDA rose 107% y-o-y. 1HFY20 was a low base due to major lockdowns in various markets where non-urgent treatments were postponed. However, since Jun 2020, patient volumes have picked up as lockdowns eased. In addition, the magnitude of COVID-19 related services provided by IHH Healthcare increased.
• The stronger EBITDA growth (margin improved 9% points y-o-y to 25% in 1HFY21) was driven by higher revenue and stringent cost control as well as operational efficiencies from higher patient volume. This, coupled with lower finance expenses and higher share of profits from JV and associates, boosted IHH Healthcare's core net profit by 660% y-o-y to RM779.4mil, which came in above at 82% of our estimate and 77% of Bloomberg consensus full-year forecast.
• While revenue came in largely in line at 54% of our full-year forecast, we underestimated the EBITDA for India and Singapore as well as overestimated its net finance cost.

COVID-19 related services and revenue intensity drove q-o-q growth

• Versus 1Q21, 2Q21 topline grew 8% while the board (Malaysia +5% points, Singapore +1% points, Turkey and Europe +3% points, and India +4% points), indicating longer length of stay.

Expect patient volume to recover gradually

• Although medical tourism remains curtailed in most breakeven in May; we see continuous EBITDA growth ahead as operating efficiency increases.

Reiterate ADD at an unchanged target price of RM6.91 pending its briefing

• We continue to like IHH Healthcare for its diversified geographical reach. We keep our FY21-22F EPS unchanged pending its briefing. IHH Healthcare is trading at an attractive valuation of more than 1 standard deviation below its 5-year historical mean.
• See
  • IHH Healthcare's Share Price,
  • IHH Healthcare's Target Price,
  • IHH Healthcare's Analyst Reports,
  • IHH Healthcare's Dividend History,
  • IHH Healthcare's Announcements,
  • IHH Healthcare's Latest News.
• Stronger-than-expected inpatient volumes and revenue intensity could re-rate the stock. The converse are downside risks.

EING Kar Mei CFA CGS-CIMB Research | TAY Wee Kuang CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-27

SGX Stock Analyst Report ADD MAINTAIN ADD 2.280 SAME 2.280