PETALING JAYA: IHH Healthcare Bhd
’s prospects remains intact underpinned by its regional footprint across key regions, expansion pipeline and demand for healthcare services, analysts say.
RHB Research said IHH’s core earnings of RM1.36bil for the nine months of financial year 2024 (9M24) beat estimates, accounting for 81% of its expectations and 72% of consensus estimates.
The research house said organic patient growth across all the countries the healthcare provider has a presence in led to 11% year-on-year (y-o-y) growth in revenue from IHH’s hospital and healthcare (H&H) division.
“On a sequential basis, the H&H segment grew 1% quarter-on-quarter (q-o-q) on the back of higher patient-admission volumes except for Turkiye due to the summer break there. Operational bed numbers were largely flattish y-o-y and q-o-q, at 12,222. Its bed occupancy rate (BOR) improved three percentage points q-o-q to 73%,” RHB Research said in a report.
In terms of segmental breakdown, the research house noted that all key geographic regions posted robust y-o-y growth in revenue intensity and inpatient admissions.
Singapore, however, saw a four percentage point q-o-q decline in BOR. RHB Research said this was due to IHH Singapore’s ongoing initiative to move less-acute patients to its ambulatory care unit while at the same time advocating preventive care service.
“Malaysia saw higher revenue intensity (up 6.5% y-o-y) driven by a better-patient case mix. IHH Laboratories reported 15% y-o-y growth in earnings before interest, taxes, depreciation, and amortisation (Ebitda) with margins up two percentage points y-o-y) on the back of higher test volumes,” the research house said.
RHB Research said it remains upbeat on IHH’s strategic plan for both organic and inorganic growth over the mid to long term, with the company’s bed expansion target of 4,000 beds by 2028 primarily in the developing markets of Malaysia and India providing an opportunity to tap into regions where demand for quality healthcare is growing.
“We maintain our positive view on IHH’s long-term prospects as we like the group’s solid execution strategy, reputable regional footprint across key regions driven by its strong brand awareness, inelastic demand for healthcare services, and focus on affluent clientele which should provide earnings resiliency,” the research house said.
RHB Research maintained a “buy” call for IHH with a target price of RM9.10.
Meanwhile, Kenanga Research said IHH’s share-price performance lagged its peers such as KPJ Healthcare Bhd and Sunway Bhd and that it considers the underperformance unwarranted.
“The valuation gap should narrow given IHH’s sheer size in terms of profitability and dominant market position in the private-healthcare space and easing operational challenges regionally. This is especially so as the locally focused KPJ and Sunway have seen their share prices rising 68% and 32%, respectively, year-to-date, respectively, versus IHH which is by 19%,” the research house said.
Kenanga Research said it expects IHH’s revenue per inpatient growth of 12% to 16% (versus an estimated 19% in 2023 due to low base effect in 2022), inpatient throughput growth of 9% to 12% (versus an estimated 7% in 2023) and BOR of 65% to 73% (versus an estimated average of 65% in 2023) for its hospitals in Malaysia, Singapore, India and Turkiye.
“We believe the key growth factor for its inpatient throughput and BOR would be revenue intensity from a case-mix with more acute cases and medical tourists, the addition of new beds previously constrained by staff shortages which are gradually easing. We expect sustained performance in Malaysia, while staff shortages in Singapore have been resolved,” the research house said.
Kenanga Research maintained an “outperform” call on IHH with a target price of RM8.11.
