AmIn­vest­ment: IHH per­for­mance to im­prove from sec­ond half

The Star Malaysia - StarBiz - - News -

PETALING JAYA: IHH Health­care Bhd’s per­for­mance should im­prove from the sec­ond half of fi­nan­cial year 2017 on­wards on the back of the ramp­ing-up of new hos­pi­tals, par­tic­u­larly Gle­nea­gles HK (GHK), says AmIn­vest­ment Bank Re­search.

The re­search firm which is main­tain­ing a “hold” call on the health­care group with a lower fair value of RM6.33, noted that GHK’s start-up cost was ex­pected to nar­row as rev­enue in­ten­sity in­creased, aris­ing from the ac­cep­tance of more com­plex cases.

AmIn­vest­ment has also rolled for­ward its val­u­a­tion base year to FY18 for IHH.

“IHH’s 2Q17 re­sults missed our and con­sen­sus’ es­ti­mates due to the higher-than-ex­pected one-off start-up cost in­curred by GHK.

“We have trimmed our earn­ings fore­casts by 35%/33%/17% for FY17/18/19F to ac­count for higher start-up costs and ges­ta­tion losses from new hos­pi­tals,” the re­search firm said.

It said IHH’s rev­enue was poised to grow by 25% in FY18, un­der­pinned by a 4%-5% in­crease in bed ca­pac­ity.

The ex­pan­sion of Pan­tai Hospi­tal Kuala Lumpur and open­ing of Gle­nea­gles Chengdu will con­trib­ute an ad­di­tional 470 beds in FY18.

“We es­ti­mate Ebitda mar­gin to be about 22% in FY17-FY18. Nonethe­less, we ex­pect to see an im­pres­sive earn­ings growth once GHK breaks even, given its size­able op­er­a­tions (equiv­a­lent to two hos­pi­tals in Sin­ga­pore).

“We be­lieve that GHK will break even in 18month to 24 months,” AmIn­vest­ment said.

To drive earn­ings growth in Park­way Pan­tai Limited (PPL) Malaysia and PPL Sin­ga­pore, the group is fo­cus­ing on en­hanc­ing ser­vice ex­cel­lence and in­creas­ing 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 three days,” it said.

“We con­tinue to like IHH for the strong prospects of the pri­vate health­care sec­tor backed by ris­ing af­flu­ence and the ag­ing pop­u­la­tion; its po­si­tion­ing in the pre­mium seg­ment of the pri­vate health­care sec­tor, trans­lat­ing to high mar­gins; and its global pres­ence with a ge­o­graph­i­cally well-di­ver­si­fied port­fo­lio of hos­pi­tals.

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