IHH’s FY21 core PATAMI of RM1.59bn (+2.3x YoY) exceed both our and consensus’ projections at 108% and 106% respectively. The stellar results were achieved on the back of a recovery in patient footfall as well as better operational efficiencies. We raise our earnings forecasts for FY22-23f by 3-6%, to reflect the improvement in operational efficiencies arising from the anticipated recovery in patient volumes. Our SOP -derived TP is subsequently raised to RM7.75, from RM7.51 earlier. Reiterate BUY on IHH.

Exceeding expectations. 4Q21 core PATAMI of RM440.8m (+24% QoQ, +19% YoY) brought FY21 core PATAMI to a total of RM1.59bn (+2.3x YoY). The performance came in above our and consensus projections at 108% and 106% respectively. The stellar performance was achieved on the back of continuous patient volume recovery. Core PATAMI was arrived at after adjusting for net EIs of -RM267.8m (mainly consists of changes in cross currency swaps’ fair value and exchange loss on net borrowings).

Dividend. Declared a DPS of 6 sen for FY21 (FY20: 4 sen per share).

QoQ. Revenue was flat despite recovery in patient volume across most of its key markets (Singapore: -3%; Malaysia: +18%, India: +1%, Acibadem: +11%). This is because the growing revenue contribution from Acibadem (+3% QoQ) was neutralised by the marginal decline in Parkway Pantai’s revenue, due to lower revenue generated from Covid-19 related services. However, core PATAMI chalked in an 24% growth, due to higher government grant received and lower staff cost (-9%).

YoY. Revenue grew 19% as most of its core markets saw improvement in patient volume (Singapore: -11%; Malaysia: +12%, India: +15%, Acibadem: +21%) and revenue intensity (Singapore: +17.5%; Malaysia: +8.3%, India: +3.4%, Acibadem: +7.3%). Ramping up of operation in Gleneagles Hong Kong, as well as the inclusion of DDRC SRL (acquired in April 2021) also contributed to the improvement in revenue. In line with the growing revenue, core PATAMI also saw a 19% growth.

YTD. The encouraging growth in revenue of 28% YoY was predominantly due to a low base effect, given the major lockdowns imposed in its key markets. Continuous recovery in patient footfall, increase in Covid-19 related services, as well as acquisition of Bel Medic and DDRC SRL also helped support the better revenue. Core PATAMI grew 2.3-fold, on the back of the Group’s strict cost optimisation measures and improved operational efficiencies.

Outlook. Covid-related revenue are likely to decline in FY22 as IHH’s key markets progressively return to normalcy. This however, should be compensated by non-Covid related services, as patient volumes continue to recover. Potential reopening of international borders should also help to support better patient volumes.

Forecast. We raise our FY22-23f forecasts by 3-6%, as we take into account the potential improvement in operating efficiencies, arising from the anticipated patient volume recovery.

Maintain BUY, TP: RM7.75. Following our earnings adjustment, our SOP-derived TP is raised to RM7.75, from RM7.51 previously. Reiterate BUY on IHH.

Source: Hong Leong Investment Bank Research - 24 Feb 2022