SINGAPORE (May 9): With a healthy local patient demand and a growing medical tourism market, CIMB Research believes Malaysia-based private healthcare operator Health Management International (HMI) could well be a cheaper hospital play compared to its peers.
CIMB is keeping its “add” recommendation on HMI with an unchanged target price of 81 cents ahead of its scheduled 3Q17 results announcement on May 11.
This is despite HMI’s 3Q headline earnings expected to be dragged by one-off items arising from professional fees related to minority interests’ consolidation.
According to CIMB analyst Ngoh Yi Sin, HMI is trading at 14.1x CY17 EV/EBITDA, lower than the industry average of 22.3x.
Following a visit to its key hospital assets in Malaysia – Regency Specialist Hospital (RSH) in Johor and Mahkota Medical Centre (MMC) in Malacca – as well as their neighbouring competitor hospitals, Ngoh says HMI is an “outperformer” relative to its peers.
“We were impressed with HMI’s healthcare facilities, patient footfall, and overall strategy,” she says in a report on Monday.
According to Ngoh, HMI had superior healthcare facilities to KPJ Johor Specialist Hospital, and higher patient footfall than Gleneagles Medini and Pantai Hospital Ayer Keroh.
“There was visibly greater patient volume at RSH,” says Ngoh, “while a new hospital extension is underway to meet higher demand by 2020.”
“An increasing number of Singaporean patients (mainly for health screening and elective procedures) remains an untapped patient pool for RSH, as it focuses on the existential demand gap in Johor,” she adds.
Meanwhile, Ngoh believes MMC could have the potential to grow its medical tourism market share. Already, MMC is one of the leading medical tourism players in Malaysia, with close to 10% of market share.
In addition, HMI could benefit from developments in Johor and Malacca, including Iskandar Malaysia and Melaka Gateway, which would boost the regions and enlarge the hospital operator’s future patient pool.
Ngoh adds that HMI’s local patient demand will also be driven by growing affluence in Malaysia and an increasing penetration of insurance coverage.
As at 12.45pm, shares of Health Management International are trading 1 cent lower at 60.5 cents.
