KUALA LUMPUR, June 2 — IHH Healthcare Bhd has reaffirmed optimism on its overall prospects pending additional beds and initiatives aimed at enhancing segment margins, said Hong Leong Investment Bank (HLIB).
In a research note, HLIB said the healthcare group is looking to add more than 2,000 beds to its system over the next three years, which includes 600 beds in Malaysia and 1,500 in India.
As for its Hong Kong segment, IHH said Gleneagles Hong Kong is targeting to add another 50 to 100 beds to its current capacity of 260, depending on private healthcare demand.
As for the Turkiye and Europe segment, IHH would mainly focus on growing inorganically via acquisitions.
However, IHH also guided that the recently acquired Izmir Kent Hospital has received approval to increase its plot size to expand the hospital, signifying growth opportunities going forward.
On its labs segment, HLIB said that it delivered remarkable growth in non-COVID-19 revenue (+26 per cent) in the first quarter of 2023 (1Q FY2023) but saw a sharp revenue decline from the second quarter of 2022 (2Q FY2022) in COVID-19 related revenue.
“The segment’s key focus in FY2023 will be to enhance its earnings before interest, tax, depreciation and amortisation (Ebitda) margins, achieved by higher-end tests, improving core efficiency in labs, and expanding its outreach efforts,” it said.
Over the medium term, HLIB said IHH intends to enhance India’s Editba margin to about 20 per cent via aggressive recovery plan for Fortis, disposal of non-performing assets, and keeping a tight rein on cost controls.
On investments in health-technology, IHH has also been making small venture investments in the health-technology space aimed to gain new learnings, future-proofing the group, and to improve overall clinical outcome for patients.
It is making venture investment with a focus on mental wellness, precision oncology diagnostic and care in Lucence, AI-enabled echocardiography and tech-driven healthcare platform Doctor Anywhere.
The research firm has a Buy call on IHH with an unchanged target price (TP) of RM7.62.
Echoing HLIB, RHB Research reiterates a Buy on IHH with a lower TP of RM6.80 as it believes that IHH’s near-term growth should be pivoted on the inelastic demand for healthcare services, while its bed expansion plan should enable it to boost its regional footprint.
“We like IHH’s solid execution strategy and reputable regional footprint. It should also benefit from a pick-up in medical tourism. This should buffer it from the effects of a challenging market environment,” said RHB Research.
It added that IHH’s growth should remain resilient, underpinned by the inelastic demand for healthcare services as evidenced by its growing patient volume although the first quarter is usually a weaker quarter due to the spate of public holidays and shorter working months.
The easing of utilities pricing in Europe in 1Q FY2023, in tandem with the normalisation of natural gas prices, could lead to a better cost structure for Acibadem Healthcare Group, said the research firm.
Hence, RHB Research is cautious about escalating labour cost and a hyper-inflationary environment limiting its margin expansion in the near term.
On medical tourism, RHB Research said the segment continues to see strong traction with the return of foreign patients post-pandemic.
It said the medical tourism segments in IHH’s Malaysia, Singapore, Turkey and India operations should account for 22 per cent, 5 per cent, 12 per cent and 10 per cent of revenues by country, respectively.
Meanwhile, Kenanga Research expects IHH’s revenue per inpatient growth of 10 per cent to 15 per cent against 18 per cent in 2022 due to 2021’s low base effect; an inpatient throughput growth of 10 per cent to 15 per cent versus 10 per cent in 2022; and a bed occupancy rate (BOR) of 60 per cent to 73 per cent against 56 per cent to 70 per cent in 2022 for its hospitals in Malaysia, Singapore, India and Turkiye.
“The key growth factor for its inpatient throughput and BOR will be the return of elective surgeries and medical travel, the addition of new beds previously constrained by staff shortages and the first full-year contribution from Ataşehir hospital in Acibadem,” said Kenanga Research.
It has an “Outperform” call on IHH with a TP of RM7.00 on its pricing power, strong recovery in patient throughput and a commanding market position in the private healthcare space with its presence in Malaysia, Singapore, Turkiye and Greater China.
As at 11 am, the counter was up two sen to RM5.76 with 580,800 transactions.
— Bernama
