IHH HEALTHCARE BERHAD (SGX:Q0F)
IHH Healthcare - 3Q22 Sequential Improvement In Malaysia & Turkey
- IHH Healthcare's 3Q22 earnings came in within our expectations, but below consensus’.
- Malaysia operations and Acibadem improved sequentially. The former marches to a full recovery while the latter’s performance was driven by markedly better revenue intensity. Operations in Singapore were muted, weighed by a melt-off in COVID-19-related contributions. Admission recovery should well anchor its earnings growth going forward.
- Maintain BUY with target price of RM7.10.
IHH's 3Q22 within our estimate but below consensus expectations.
- IHH Healthcare (SGX:Q0F)’s 3Q22 core profit of RM315m contracted 11.1% y-o-y (-0.7% q-o-q). This brought 9M22 core profit to RM1040m (-9.9% y-o-y). This is within our estimate but below consensus’ full-year estimate, at 70% and 63% of full-year earnings respectively.
- Highlights for the quarter include Malaysia’s operations returning to pre-pandemic levels and a stabilising in Acibadem’s contribution amid its hyper-inflationary conditions.
Muted performance in Singapore.
- Top-line of IHH Healthcare's Singapore operations remained flattish at 0.4% q-o-q. This was amid a softening in inpatient admission (-1.9% q-o-q) off unchanged revenue intensity, coupled by tapering off in COVID-19-related revenue. Bed occupancy rates (BoR) remained underwhelming at 57% vs pre-pandemic levels of 66%. This is in part due to high medical tourism contributions previously (>20% of patient volume).
Malaysia sustained recovery
- Meanwhile, Malaysia sustained its recovery, with BoR almost back to pre-pandemic levels at 70% for the quarter (2Q22: 61%). As a result, inpatient admission volume grew 16.9% q-o-q. Further recovery in medical tourism could provide further uplift in its BoR.
- The higher elective case mix diluted revenue intensity to RM9,266/patient (-16.3% y-o-y). Revenue grew by 10.6% q-o-q as a result. Despite the lower revenue intensity, EBITDA margins improved marginally by 0.1ppt to 29.5% thanks to the positive operating leverage.
Acibadem’s contribution steadies as India’s performance was uneventful.
- Acibadem’s revenue grew 5.2% q-o-q as revenue intensity in ringgit terms (19% q-o-q, in local currency terms: +26%) more than offset lower patient volume (-9.3%). Earnings recovered on a q-o-q basis despite the hyper-inflationary environment.
- Meanwhile in India, revenue exhibited decent growth (+6% y-o-y) off solid operating statistics, but this was offset by higher cost as earnings was muted.
IHH Healthcare – Earnings forecast revision & recommendation
- No changes to earnings forecast for IHH Healthcare.
- Maintain BUY recommendation on IHH Healthcare with SOTP-based target price of RM7.10. Our target price is unchanged as we roll over our earnings to 2023.
- Parkway Pantai Limited (100% equity stake): RM4.54/share
- Acibadem (90% equity stake): RM1.28/share
- Fortis (31.1% equity stake): RM0.73/share
- IMU Health (100% equity stake): RM0.17/share
- Parkway Life REIT (SGX:C2PU) (35.7% equity stake): RM0.32/share
- Our SOTP-based target price for IHH Healthcare implies 37.4x 2023F P/E, or close to its -1 standard deviation of its 5-year mean P/E. Valuations appear decent with resilient yet defensive 3-year earnings (2021-24) CAGR of 4.2%.
- See
- IHH Healthcare’s attractive valuations and decent earnings growth outweigh the hyper-inflationary risks associated with Acibadem.
- Key downside risks are:
- execution risk,
- shortfall in turning around Fortis, and
- heightened regulatory hurdles.
Philip Wong
UOB Kay Hian Research
|
https://research.uobkayhian.com/
2022-11-30
SGX Stock
Analyst Report
2.18
DOWN
2.200
