IHH shares retreat after reporting loss in Q1
Analyts see earnings recovery for hospital operator from Q3
PETALING JAYA: IHH Healthcare Bhd’s share price closed off its lows at RM5.50 a share, down ten sen in yesterday’s trading after Asia’s biggest healthcare provider by market value reported a loss in its first quarter.
Analysts are predicting lower results in the second quarter but predict earnings recovery from from the third quarter onwards as patients return.
IHH has been hit like other private hospitals globally with a lower number of patients as a result of the ongoing Covid-19 pandemic.
Maybank Investment Bank, which has maintained a “buy’’ call on the stock, expects that the second quarter could be IHH’S worst quarter since its listing, as there would be two full months of Covid 19-induced poor earnings in April and May.
“We understand that the bulk of the semi-elective surgery patients have returned in June while the elective surgery patients may only fully return in the second half,’’ Maybank IB said.
Its 12-month target price is RM6.05 a share. It has also lowered its financial year (FY) 2020 earnings per share (EPS) by 10% but maintained its EPS targets for the next two years.
CGSCIMB Research believes IHH has sufficient financial strength to tide it through the difficult times. It is also working to defer its non-critical expansion plans, such as the completion of Parkway Shanghai Hospital to FY2021.
It has further pared down its non-lira (Turkish) debt exposure.
IHH has operations in ten countries with 15,000 beds.
IHH reported a net loss of Rm320mil for 1Q2020 against a net profit of Rm89.51mil a year ago.
The loss was due to a Rm400mil goodwill impairment at its Indian subsidiary and Rm60mil foreign exchange losses.
Aminvestment Bank Bhd is also of the view that IHH’S Q2 performance will be subdued.
But with the easing of the lockdown, patient volume will gradually recover from the 2H20 onwards.
“In the long term, we expect the group to continue to grow on the back of sustained demand growth in all of its markets, expansion in multiple countries, better operational metrics, and tighter cost controls,’’ Aminvestment Bank Bhd said. It maintained its “buy’’ call on the stock.
Affin Hwang Capital said the key upside risks were stronger-than-expected recovery in patient arrivals/inpatient admissions, higher revenue intensity per inpatient.
However, the downside risk is weaker-than-expected earnings due to lower in-patient admissions and high operating costs. Affin maintains a “hold’’ on the stock. Kenanga Research’s concerns are over issues at Fortis, including an auditor’s qualified audit report in FY19, potential risk of provisions, lapses in internal controls leading to regulatory probing, which could well mean execution risk.
UOB Kay Hian also has similar concerns including the weakening lira and uncertainties in the India operations.
Going forward, MIDF Research said the group expects to further drive efficiency in its operations, and realise additional resources via divestment of under performing non-core assets.
“Through these initiatives, we believe that the group would be able to protect its profit margin and redeploy the additional cash to pare down debt.
“The strong cashflow generative markets like Singapore and Malaysia will continue to support the group’s performance in the near term.
“In addition, we expect long-term growth opportunities in India and Greater China as the markets are largely under-served,’’ MIDF said.