Comments

• IHH Healthcare’s wholly-owned subsidiary Parkway Pantai Ltd will develop a 450-bed multi-specialty tertiary hospital in Shanghai New Hongqiao International Medical Center (IMC) via a joint-venture, of which 70% will be owned by Parkway Pantai and the remaining 30% owned by Shanghai Hongxin Medical Investment Holding Co Ltd.

• Named as ParkwayHealth Shanghai International Hospital, the hospital will open to the public in 2020, with a registered capital of 455m yuan (RM280m).

• The hospital will be on a leasehold basis for 50 years, is built on a 35,754 square metre site.

• We are positive on the news and we believe IHH would be able to solidify its presence in the China market as Shanghai is one of the world’s largest cities in terms of population.

• Furthermore, the hospital will be located in a prime commercial belt, close to the Hongqiao airport and high speed railway station. This would attract more medical tourists and local residents to the new hospital.

Catalysts

• Global population growth;

• Ageing demographics;

• More affluent community;

• Proliferation of medical tourism; and

• Higher healthcare demand.

Risks

• Regulatory / competitive / FOREX risks;

• Higher staff cost; and

• Inability to unlock synergies of the enlarged entity.

Forecasts

• Unchanged.

Rating

HOLD

• TP: RM6.23

• Positives – strong brand name, booming of medical tourism, high demand for quality healthcare services, continuous expansions and complemented by education arm.

• Negatives – high staff cost and retention of reputational medical practitioners.

Valuation

Reiterate our HOLD call and unchanged SOP-derived TP of RM6.23 (see Figure #1).

Source: Hong Leong Investment Bank Research - 9 Jun 2016