SINGAPORE (June 5): Maybank Kim Eng Research is maintaining its “hold” call on IHH Healthcare with a higher price target of RM6.17 ($2) from RM5.62 previously, highlighting the stock as a healthcare leader in the premium hospital segment with a strong brand name.
The counter continues to trade at a premium of 22 times FY17E EV/EBITDA, versus 20 times for its regional peers.
In a Monday report, analyst John Cheong notes that aside from being a proxy to the premium healthcare space in countries with rapidly growing demand, the group also has a strong track record of building up operations in markets lacking medical-pricing regulations.
IHH also has 3,000 new beds representing an approximately 30% increase, in its pipeline to sustain future growth.
However, several risks remain for the group’s outlook – including regulatory risks such as caps on healthcare pricing and restrictions on foreign doctors; MYR/SGD changes that could lead to translation losses; as well as geopolitical risks in less-stable emerging markets such as Turkey, Iraq and the UAE.
IHH also faces a potential write-down of goodwill on consolidation, which forms about 50% of its net asset value, should it fail to integrate its acquired entities.
Cheong is nevertheless confident of ample expansion opportunities ahead for the group to drive its growth.
“Three new hospitals with 1,175 new beds in 2017 will drive growth (none in 2016). This includes the 500-bed Gleneagles Hong Kong in 1H17, the 325-bed Acibadem Altunizade (1H17) in Istanbul, and the 350-bed ParkwayHealth Chengdu Hospital (2H17),” states the analyst.
“Beyond this, continued expansion in China (2 more new hospitals) and India (1,192 operational beds out of 1,546 licensed beds) could drive longer term growth,” he adds.
As at 1:13pm, shares of IHH Healthcare are trading 1 cent higher at $1.93.
