KUCHING: IHH Healthcare Bhd’s (IHH) first half of 2014 (1H14) results were generally in line with expectations, largely accounting for more than 50 per cent of analysts’ full year forecasts.
In a filing to Bursa Malaysia, IHH highlighted that for the six months ended June 2014, the group’s revenue, excluding contribution from Plife REIT, was nine per cent higher year on year (y-o-y) at RM3.6 billion, while earnings before interest, tax, depreciation and amortisation (EBITDA) grew 14 per cent to RM819.5 million and profit after tax and minority interest (PATMI) excluding exceptional items improved by 27 per cent to RM338.6 million.
According to the research arm of Hong Leong Investment Bank Bhd (HLIB Research), IHH’s inpatient admission volume grew healthily y-o-y in all three key markets, with Singapore, Malaysia and Turkey gaining 11.5 per cent, 13 per cent and eight per cent, respectively.
“Sequentially, they expanded by 8.3, 6.5 and 0.7 per cent quarter-on-quarter (q-o-q), respectively.
“However, we expect these figures to decline in both Singapore and Malaysia due to seasonality in conjunction of Ramadhan and Hungry Ghost festivals,” HLIB Research opined.
On a side note, the research arm highlighted that IHH is confident that emerging markets will continue to enjoy higher growth in demand for quality private healthcare driven by demographics of home markets, faster growing upper and middle class and increased medical travelers from non-traditional markets to medical hubs.
In terms of regional expansion, the research arm of Affin Investment Bank Bhd (Affin Research) noted that the group is confident with their expansion plans based on its strong balance sheet and cash flow support.
“However, we remain cautious on the mitigation of higher staff costs and inflationary pressures that would translate into lower inpatient volume if price adjustments are not well absorbed,” Affin Research said.
Moreover, the research arm pointed out that IHH faces great currency and political volatility due to its expansive footprint across Asia, Europe, Middle East and North Africa.
All in, it made no change to its earnings forecast. Affin Research thus maintained ‘reduce’ on IHH. It added that this is a slight premium to regional peers given its huge market capitalisation, strong growth prospects as well as premium position.
“Downside risk to our recommendation includes uncertainties in regional expansion, foreign exchange and political risks for overseas operations.
“Upside risk to our recommendation is stronger-than-expected growth in patient admission and earnings,” the research arm affirmed.
As for HLIB Research, while having left its forecasts unchanged, it reiterated ‘sell’ on the stock.