IHH Healthcare - UOB Kay Hian 2022-11-30: 3Q22 Sequential Improvement In Malaysia & Turkey


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

Philip Wong UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-11-30
SGX Stock Analyst Report BUY MAINTAIN BUY 2.18 DOWN 2.200