-  We re-affirm our HOLD recommendation on IHH Healthcare with an unchanged fair value of RM3.25/share (under-review), based on FY13F’s sum-of-parts valuation, pending meeting with management.

-  Violent protests and riots has erupted in Turkey since 31 May 2013, stemmed primarily from a crackdown on a peaceful anti-government demonstration to save trees. Istanbul’s city central Taksim Square was slated to be demolished and replaced with a shopping mall.

-  In light of Turkey’s ongoing unrest for several days, there were two confirmed deaths with many others suffering from severe injuries.

-  We conclude it would have a rather mixed impact on IHH. Without hesitation, we opined that hospital operations would become challenging due to the disruption. Logistics and lack of nurses and doctors are likely to be key challenges in Acibadem’s operations.

-  Although injuries sustained from the protest would provide a kicker for an upward trend in inpatient admissions volumes and average revenue per inpatient admission, this is believed to be at the expense of the medical tourism arm, which caters to the CEEMENA region.

-  Admittedly, travelling into Turkey is generally not encouraged due to safety concerns of unrest in the country. Should the unrest prolong further, the medical tourism business could be potentially hit hard due to a drop in inpatient admissions volumes by medical travellers. Medical travellers with plans to seek medical treatment in Turkey would end up diverting elsewhere.

-  IHH exposure in Turkey (60%-stake) is relatively big, commanding 40%, 36% and 17% respectively in revenue, EBITDA and PATMI, as at end-1QFY13. Across Turkey, the group operates 16 hospitals and 12 medical centres.

-  Against an uncertain backdrop, we deem there are minimal implications for now as the financial impact is still early to gauge. No change our FY13F-FY15F earnings estimate. We maintain our HOLD call as valuations are not cheap. We prefer KPJ Healthcare (BUY, RM8.00/share) for valuation and dividends considerations.

Source: AmeSecurities