Company Overview
IHH Healthcare Berhad is a Malaysia-based investment holding company. The Company provides a full spectrum of integrated healthcare services. The Company's segments include Hospital and healthcare, IMU Health, PLife REIT and Others. It operates its Hospital and healthcare segment in Singapore, Malaysia, India, Greater China, Turkey and Europe and Southeast Asia. Its portfolio of brands include Acibadem, Mount Elizabeth, Prince Court, Gleneagles, Fortis, Pantai, Parkway and IMU. These brands offer its patients comprehensive and personalized care ranging from primary to quaternary, and even ancillary services, such as laboratories, diagnostics, imaging and rehabilitation. It provides day-to-day healthcare services through outpatient treatment, routine check-ups and vaccinations. Its secondary care comprises specialist consultation, local surgeries, emergency care, laboratory services, diagnostics and acute treatment. It operates approximately 80 hospitals in 10 countries.
Investment Overview
One of Asia’s largest healthcare service providers, riding on the growth of private healthcare in various key markets in Asia. IHH Healthcare (IHH) is one of Asia’s largest healthcare service providers with footprints in strong key growth markets in Asia – such as Malaysia, Singapore, Hong Kong, India, China, and Türkiye.
Gleneagles HK expected to deliver exponential EBITDA growth and looking forward to net profit breakeven soon, driving its next leg of growth. Gleneagles HK is beginning to deliver exponential EBITDA growth after it turned EBITDA positive in 2021. We believe this will make a positive contribution towards IHH’s next leg of growth.
Returning to normal but on a higher earnings base vs. pre-COVID. Despite operational disruptions in the past few years, we believe operations have started to return to normal. The strong return of local and foreign patients could likely keep earnings elevated and above pre-COVID levels. Our TP has an upside of 24%, from i) a dividend yield of 1.5%, ii) a 6% two-year CAGR for core earnings, and iii) a valuation re-rating. This comes along with consistent earnings growth delivery.
Maintain BUY; raised TPs to RM7.60/SGD2.18. We maintain our BUY rating but raised our TPs to RM7.60/SGD2.18 from RM7.30/SGD2.20 (higher due to exchange rate) previously. We revised our FY24F earnings by 7% to moderate EBITDA margins marginally. Our TP is based on a sum-of-parts (SOP) valuation methodology. We applied EV/EBITDA multiples ranging between 10-20x based on its various geographical markets.
Our target price of RM7.60/SGD2.18 is based on sum of parts valuation methodology by geography. We applied EV/EBITDA ranging from 10x to 20x based on its various geographical market.
Risks
Economic slowdown / recession may impact demand for private healthcare. While healthcare demand is resilient, economic slowdown / recession may affect demand for private healthcare.
Government policy changes the court to overrule IHH’s acquisition of Fortis Healthcare
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