KUALA LUMPUR: IHH Healthcare Bhd
's nine-month results were below market forecasts despite an improved topline, as weak profits in its Singapore and Turkiye operations weighed on earnings.
On a year-on-year basis, the hospital operator reported that 9MFY23 revenue increased 19% due to the return of both local and foreign patients, a case mix of more acute cases and price adjustments to counter inflation.
The opening of Atasehir Hospital, the expansion at Gleneagles Hong Kong hospital and the acquisition of Ortopedia Hospital also contributed to the higher total revenue.
Kenanga Research slashed its FY23 net profit forecast for IHH by 7% as it reduced its earnings before interest, depreciation and amortisation (Ebitda) assumption for its operations in Singapore and Turkiye, while maintaining projections for FY24.
The research firm, which has an "outperform" recommendation on the stock, left its sum-of-parts target price of RM7 intact.
"We continue to like IHH for its pricing power, as the inelastic demand for healthcare provides it with the ability to pass cost through amidst rising inflation, the strong recovery in patient throughput, from both domestic and international markets as the pandemic comes to an end, and its commanding market position in the private healthcare space with presence in Malaysia, Singapore, Türkiye and Greater China," it said in its results note.
Meanwhile, MIDF Resesarch said it is optimistic the group will rein in costs by leveraging synergies within its international network to achieve cost efficiencies, streamlining of workflows and operational excellence.
"We are also anticipating IHH to actively taking steps to revitalise its underperforming assets and in turn, unlock their full potential to fulfil the group’s long-term growth aspirations," it said..
MIDF revised its earnings forecasts for FY23 and FY24 lower by 9% and 10% respectively in light of its disappointing 9MFY23 earnings, coupled with the ongoing divestment of Fortis Malar Hospital in Chennai by Fortis Healthcare Ltd.
The research firm maintained its "buy" call after revising its target price lower to RM7.08.
