IHH’s 3QFY20 core PATMI of RM243.3m (-RM87.3m QoQ, +17.5% YoY) brought the 9MFY20 amount to RM333.3m (-47.7% YoY). The results were below expectations due to shortfall in revenue. YTD revenue fell mostly due to Covid19 pandemic with lower number of patients coming in for treatments. We cut our FY20-22 forecasts by -26%/-4%/-2% to reflect in lower revenue contribution. As we roll forward to FY21 (from mid-FY21), and post earnings adjustments, our SOP based TP increases marginally to RM5.17 (from RM5.02). Maintain HOLD.

Below expectations. 3QFY20 core PATMI of RM243.3m (-RM87.3m QoQ, +17.5% YoY) brought 9MFY20 core PATMI to RM333.3m (-47.7% YoY). The latter was computed after adjusting for net EIs of –RM463.73 (amongst others, impairment, changes in fair value of cross currency swaps and foreign exchange). The result was below ours and consensus’ full year estimates at 50%-60%. The deviation was mainly due to topline shortfall.

QoQ. Revenue improved (+37.2%) with a recovery of increasing number of patients coming in for treatments, from a low base in 2Q, which was affected by the lockdowns and travel restrictions implemented. Inpatient admission volume improved in all segments: Singapore (+26.2%), Malaysia (+37.2%), India (+36.6%) and Acibadem (+26.9%). Average revenue per inpatient in India showed the most prominent recovery (+18.7%). EBITDA increased (+211%) that led to IHH seeing core PATMI of RM243.3m (vs.2QFY20: –RM87.3m).

YoY. Revenue fell (-7.1%) mainly caused by Covid-19 pandemic that resulted to lower patients volumes (patients postponed non-urgent treatments and lower foreign patients due to various travel restrictions). Lower inpatient admission volume was seen in all segments: Singapore (-18.6%), Malaysia (-28.9%), India (-33.1%) and Acibadem (- 11.6%). Yet, this was partially mitigated by the better average revenue per inpatient in all segments: Singapore (+1.5%), Malaysia (+27.1%), India (+20.6%) and Acibadem (+13.9%). EBITDA remain flat (+0.5%) whilst margins improved slightly by 1.8ppts to 23.7% due to government grants and reliefs as well as cost containment efforts. All in, core PATMI improved (+17.5%).

YTD. Revenue of RM9.64bn saw a reduction (-13% YoY) mainly due to Covid-19 pandemic (same reason as YoY). IHH recorded lower inpatient volume in all their segments: Singapore (-8.8%), Malaysia (-5.5%), India (-3.2%) and Acibadem (-9.5%). Nevertheless, this was slightly cushioned by improvement in average revenue per inpatient in Singapore (+6.2%) and Acibadem (+307%). EBITDA was hurt (-23.2%) by higher operating expenses (+17%) on extra costs incurred from the implementation of Covid-19 precautionary measures, even though it was slightly cushioned by government grants and reliefs. Following that, core PATMI of RM333.3m (-47.7%) was reached.

Outlook. We are hopeful for a better recovery in the coming quarters, with expectation of increasing flow in number of patients seeking treatments. We further gather improvement in occupancies across segments were promising. 3QFY20 occupancies: Singapore (52%), Malaysia (50%), Acibadem (65%) and India (59%). IHH also has completed its acquisition on Prince Court Medical Centre in Sep.

Forecast. We cut our FY20-22 forecasts by -26%/-4%/-2% to reflect in lower revenue contribution.

Maintain HOLD, TP: RM5.17. Despite our forecast cuts, as we roll forward to FY21 (from mid-FY21), our SOP based TP increases slightly to RM5.17 (from RM5.02). Maintain our HOLD call.

Source: Hong Leong Investment Bank Research - 27 Nov 2020