MIDF keeps ‘buy’ call on IHH with RM6.95 target price

KUALA LUMPUR: The RM101.7 million paid by IHH Healthcare Bhd for Amanjaya Specialist Centre Sdn Bhd (ASCS) in Sungai Petani, Kedah, is fair, said MIDF Research.

The firm believes the acquisition is necessary to sustain IHH’s revenue growth.

MIDF Research said based on the price, the cost per bed was estimated at RM1 million.

Traditionally, it said the cost of acquisition per bed could vary between RM700,000 and RM1 million, depending on the number of beds, types of specialisation and location.

“We believe the hospital’s fair value deserves to be at a higher range bound as it was opened in 2014 and hence, quite new. It has a good reputation as one of the best private hospitals in Sungai Petani in terms of location, facilities and service. The hospital is green building index-certified, which means it requires lower energy utilisation.

“This translates to a reduction in operating cost by 15 to 20 per cent,” it said in a note yesterday.

IHH announced on Monday it had fully acquired ASCS.

MIDF Research is positive on the news as the acquisition would complement IHH’s Pantai Hospital Sungai Petani, which is operating at near maximum capacity.

MIDF Research said the acquisition was not expected to contribute significantly to IHH’s earnings in financial years 2018 and 2019.

The firm maintained its “buy” call on IHH, with an unchanged target price of RM6.95.