IHH set to improve in 2H thanks to Gleneagles Hong Kong
Revenue is poised to grow by 25 per cent in FY18, underpinned by a 4 to 5 per cent increase in bed capacity. The expansion of Pantai Hospital Kuala Lumpur and opening of Gleneagles Chengdu will contribute an additional 740 beds in FY18.
KUCHING: Despite missing out on consensus estimates last quarter, IHH Healthcare Bhd’s (IHH) performance is set to improve from in its second half of financial year 2017 (2HFY17) on the back of the ramping-up of its new hospitals, particularly Gleneagles Hong Kong.
In a company update by AmInvestment Bank Bhd (AmInvestment Bank), the bank highlighted that the group had missed its mark in the second quarter of FY17 ( 2QFY17) due to higherthanexpected one- off start- up cost incurred by Gleneagnes Hong Kong.
This caused them to trim their earnings forecasts for FY17, 18 and 19 by 35, 33 and 17 per cent respectively, to account for higher start-up costs and gestation losses from new hospitals.
However moving forward in 2HFY17, the bank opines that Gleneagles Hong Kong’s start-up costs are expected to begin narrowing as its revenue intensity increases from the acceptance of more complex medical cases at the hospital.
“Revenue is poised to grow by 25 per cent in FY18, underpinned by a 4 to 5 per cent increase in bed
AmInvestment Bank
capacity. The expansion of Pantai Hospital Kuala Lumpur and opening of Gleneagles Chengdu will contribute an additional 740 beds in FY18,” it guided.
While the bank is also estimating the group’s EBITDA margin to be slightly lower in FY17-18 at circa 22 per cent compared to the 23 per cent in FY16, they still expect to see an impressive earnings growth once Gleneagles Hong Kong has achieved breakeven, given its sizeable operations.
“We believe that Gleneagles Hong Kong will achieve breakeven in the next 18 to 24 months.”
Meanwhile, looking towards IHH other assets, its Singaporean market is currently the only market where digital health is available and bespoke medicines are an option.
The innovation is however expected to be replicated in other home markets which should properly the group’s earnings growth further.
And to further sustain earnings growth in PPL Malaysia and PPL Singapore, the bank guides that the group is now focusing on enhancing service excellence while optimising revenue per bed.
“Management is looking at reducing the length of stay with the use of more sophisticated medical technology, which results in more minimally invasive surgeries. This increases bed turnover and results in higher yield per bed.
“Currently, average length of stay in Malaysia and Singapore is less than 3 days,” said AmInvestment Bank.
Furthermore, IHH’s earnings are also expected to be enhanced further through restructuring exercises to focus on general medicine and outpatient services in two of its underutilised hospitals in Turkey – Acibadem and Altunizade.
Looking forward, IHH is look to further expand its footprint in China and India markets by means of merger and acquisition activities as an expansion means especially in North India which has the highest healthcare spend per capita in India.