IHH recorded a core net profit of RM1,594m in full-year FY21, representing a strong growth of 123% YoY, mainly due to a low base effect as its operations were adversely affected in FY20, given the implementation of movement restrictions in its key markets. The results came in above both our and consensus estimates at 111% and 106% of full-year forecasts respectively and the discrepancy in our forecast was mainly due to the higher-than-expected revenue. As we expect the economy to gradually revert to normalcy with Covid-19 infection becoming less virulent, we expect IHH to derive lower revenue from Covid-19 related services in FY22F. As such, our earnings forecasts remain unchanged for now. We maintain our Outperform rating on IHH with an unchanged SOTP-based TP of RM7.50, based on 2-year forward average EBITDA. On a side note, IHH declared a first and final dividend of 6sen per share.

• Results highlight. IHH’s 4QFY21 revenue saw a 18.7% YoY growth to RM4.5bn. The strong revenue was mainly due to growth in revenue intensity across all geographical locations (Singapore: +17.5% YoY, Malaysia: +8.3% YoY, India: +3.4% YoY, Acibadem: +7.3% YoY). This was due to higher number of complex cases performed and an upward price revision in Acibadem to combat inflationary pressure as well as higher contribution from Covid-19 related services (accounting for 5- 29% of the respective home markets’ 4QFY21 revenue), particularly for Singapore. On a side note, the foreign patient volume remained low in most of the main market except for Acibadem.

• 4QFY21 EBITDA grew by 6.8% YoY to RM1.1bn, driven by higher revenue as patient volume improved across all the geographical areas except for Singapore where it posted a 11% decline in inpatient admission. However, this was partly offset by higher staff cost and lower government grant income. The increase in staff cost was mainly due to recruitment and retention of healthcare professionals and provision of bonus for staff. As such, EBITDA margin decreased by 3ppt YoY to 25%. We also noted that Gleneagles Hong Kong continue to deliver positive EBITDA in 4QFY21.

• Outlook. Given the inelastic demand for healthcare, we expect the normalisation of world travel habits should benefit IHH on the back of pent up demand from domestic and international patients. However, there might be short-term headwinds as Covid-19 services taper off.

Source: PublicInvest Research - 24 Feb 2022