• Maintain BUY (TP: RM7.17). IHH’s 3MFY24 top-line improved by +15.8% YoY to RM5,955mn due to sustained patient volume and an increase in acute, complex cases. The better performance was supported by strong revenue growth from across key markets (Singapore: +18% YoY, Malaysia: +9% YoY, India: +20% YoY, Greater China: +24% YoY, Turkiye & Europe: +23% YoY). In tandem, IHH recorded higher 3MFY24 core net profit of RM403mn (+22.1% YoY) which was in-line with our and consensus expectations, accounting for 25.6% and 23.9% respectively. Maintain a BUY call with an unchanged TP of RM7.17. Our valuation is derived based on SOP valuation with a WACC of 7% for Parkway Pantai Limited, 11% for Acibadem.

• Key highlights. Focusing on the hospital and healthcare segment, revenue increased by 19% YoY to RM5,649.8mn. This growth was driven by sustained demand for quality healthcare services, a case mix of more acute patients, and price adjustments to counter inflation. At the EBITDA level, all major operations showed improvement except for Malaysia, which saw a 4% YoY decline with initiatives to reward healthcare workers. On a quarterly basis, top-line and bottom-line improved by 12.5% QoQ and 51.8% QoQ respectively. This improvement was driven by better performance across the segments, namely hospital & healthcare (+8% QoQ), labs (+6% QoQ) and PLife Reit (+2% QoQ).

• Earnings Revision. No changes to our forecast.

• Outlook. It is worth noting that IHH completed the acquisition of Timberland Medical Centre in Kuching, Sarawak, in 1Q24. The group plans to begin construction of a new 200-bed greenfield hospital this year. This expansion strengthens medical tourism, with over 30% of patients being medical travellers, and the group anticipates that 30%-35% of patients come from Indonesia. These developments are expected to positively impact IHH's Malaysian operations in the coming years, meeting the growing demand from both local and foreign patients. Additionally, scaling infrastructure can lead to economies of scale and improved operational efficiency, potentially reducing costs per patient treated.

Source: BIMB Securities Research - 30 May 2024