SINGAPORE (May 31): UOB Kay Hian is maintaining “buy” on IHH Healthcare with a target price of RM6.30 ($2.07), which implies 32.8 times 2020F P/E – well below its historical five-year 12 month forward P/E of 57 times based on the stock’s performance on the KLSE.
This comes post the release of the dual-listed healthcare services provider’s 1Q19 earnings results, which exceeded consensus estimates and serve as a precursor to an exciting 2019, says UOB analyst Philip Wong in a Friday report.
Going forward, Wong expects IHH to sustain its upward operational earnings trajectory after the group’s established markets in Singapore and Malaysia sustained “impressive growth” over 1Q. This would be further boosted by added gestation of hospitals in Pantai Manjung, Kota Kinabalu and Medini in Malaysia, he adds.
“We expect the previously-mismanaged Fortis to draw on IHH’s deep bench of management from existing Indian operations, to beef up operations and to improve operational Fortis’ earnings every subsequent quarter over the near term,” says Wong.
In all, he believes IHH’s lofty valuations are well-justified by the group’s “highly-resilient, defensive and attractive” three-year earnings CAGR of 22.7%, as well as its increasingly mature but relatively-new greenfield hospitals, Gleneagles Hong Kong and Altunizade Hospital.
“Consistent headway underpins our expectation of Gleneagles Hong Kong achieving EBITDA breakeven in 2H19… Unsurprisingly, Acibadem’s EBITDA earnings grew a sturdy 24% yoy. Apart from that, the US$250m debt has been paid down while management looks to match the remaining US$$350m debt to Acibadem’s operational currency exposure by 2020,” says the analyst.
“Additionally, Fortis complements IHH’s portfolio of presence in highly populous emerging markets with a highly visible pipeline of growth stretching for years.”
Shares in IHH last traded 2.99% higher at RM5.52 on KSLE, and 0.56% higher at $1.80 on SGX, before the midday trading break for both bourses.
