IHH shares at 43-month low on Turkish operation concerns
PETALING JAYA: IHH Healthcare Bhd’s shares fell to a 43-month low amid ongoing concerns about its Turkish hospitals that could see it recognise higher foreign currency translation losses.
The second largest hospital group in the world saw its shares tumbling by 23 sen or 4.35% to RM5.06 at yesterday’s close after a healthcare sector report by Affin Hwang Capital Research had highlighted IHH’s issues in Turkey.
IHH was the biggest laggard of the FBM KLCI as its decline had weighed on the overall FBM KLCI by 3.398 points yesterday.
Yesterday’s trade saw IHH falling to its low- est levels in recent times and it now has a market capitalisation of RM41.72bil.
The report said that IHH wouldlikely see sustained Turkey losses in ringgit terms given the sharp depreciation in the Turkish lira recently.
The Turkish lira last traded at 6.3548 against the US dollar and it has weakened by some 3% since the end of last week.
The lira is still sitting near its historical lows following a currency crash that happened last month which brought it to a historical low of 6.8838 to the dollar.
Dealers said the lira has not recovered meaningfully from the lows that were set in August implying that the current levels were still not working to IHH’s favour.
“This is due to the mismatch between fund- ing currency of its debt in euros against the US dollar and the operational currency of the lira.
“Ultimately, this will result in foreign exchange translation losses on the group’s balance sheet and income statement,” Affin Hwang’s report said.
IHH owns 60% of Turkey-based healthcare group Acibadem Holdings, which contributes about a third of its revenue.
Affin Hwang also said in the same report that it expected IHH in-patient volumes to recover in the second half of 2018.
“We believe the companies under our coverage, including KPJ Healthcare Bhd and IHH, possess the competitive advantage to thrive in an evolving environment,” it said.
“Despite IHH’s flattish revenue for the quarter, in constant currency terms, revenue grew 14%. However, earnings were largely lifted by Singapore with margins expanding against higher inpatient revenue and the increasingly gestated Gleneagles Hong Kong,” Affin Hwang added.
The research house maintained its “buy” rating on the stock with an unchanged target price of RM7.10.
According to IHH’s 2017 annual report, Acibadem Holdings owns 21 hospitals and 16 medical centres in Turkey, Macedonia and Bulgaria.
IHH’s operations in Turkey have been a major growth driver for it in recent times and it was the biggest country segment growth for the group compared with the other markets it is operating in.