SINGAPORE (Aug 24): CIMB is maintaining its “add” call on IHH Healthcare with a target price of RM6.99 ($2.22).
The research house likes IHH for its established geographical presence in key populous countries, proven track record and strong brand equity.
The group reported a higher than expected 2Q17 PATMI of RM317 million.
Excluding RM230 million worth of exceptional items, which were mainly from gains on the disposal of its Apollo stake, the group would have reported a loss, mainly due to higher gestation costs in Hong Kong, additional financing expenses and unfavourable FX translation effects.
In a Wednesday report, analyst Ngoh Yi Sin says, “1H17 EBITDA of RM1101 million formed 48% of our FY17 forecasts.”
See: IHH Healthcare 2Q earnings grow 29% to RM316.6 million
The group reported improved operational performances in its major operating markets like Malaysia and Singapore with 10% and 15% y-o-y increase for topline respectively as well as 12% and 20% y-o-y increase in EBDITA respectively.
However, its operations in India did not show positive results as its 2Q17 EBDITA dropped 42% y-o-y due to the recruitment of new consultants, despite revenue improving 31% y-o-y.
The analyst does not see this as a major concern given its relatively small earnings contribution and longer-term story.
“A big reason why we are bullish on IHH is because we believe in management's ability to execute in Hong Kong,” says Ngoh.
To recap, Gleneagles Hong Kong (GHK) opened in March this year and is already seeing positive revenue contribution and narrowing EBDITA losses to RM72 million in 2Q17 from RM85 million in 1Q17.
The management also announced that GHK has shown impressive ASPs which are close to Singapore levels.
In its Singapore operations, Mount Elizabeth Novena led the growth with both inpatient volume and average inpatient revenue up 1.3% and 8.7% y-o-y respectively.
For this quarter, the analyst believes that Acibadem’s headline numbers were perhaps the biggest negative surprise, mainly due to FX translation. This was despite seeing a good ramp-up in its new hospitals.
Shares in IHH are trading at RM5.98 as at 10.04am.
The stock is trading at 58.85 times FY17 PE with a dividend yield of 0.41%.
