IHH reported 4Q22 core PATAMI of RM340.4m (+8% QoQ, -23% YoY), bringing FY22 full year core PATAMI to RM1.504bn (-6% YoY). The results came in within both our and street estimates at 99% and 100% respectively. IHH continues to register decent performance as more patients return to seek treatment. Make no changes to earnings forecast as results were in line. Maintain BUY on IHH, with a higher SOP-derived TP of RM7.79 (from RM7.75 previously), as we roll forward our valuation base to FY23.

Within expectations. IHH reported 4Q22 core PATAMI of RM340.4m (+8% QoQ, -23% YoY), bringing FY22 full year core PATAMI to RM1.504bn (-6% YoY). The results came in within both our and street estimates at 99% and 100% respectively. Our 4QFY22 core PATAMI was arrived at after excluding EIs (mainly impairment of assets and goodwill on some of its China assets) totalling to RM149.1m.

Dividend. Declared DPS of 7 sen for FY22, going ex 30 March 2023. (FY21: 6 sen)

QoQ. Revenue grew 6% as most of its key markets reported better contribution (Malaysia: +4%, Singapore: +5%, Turkiye & Europe: +21%), with the exception of India (-2%) as it was hampered by lesser inpatient admission (-6%). Revenue intensity for both Singapore and Malaysia saw healthy growth of 12% and 5% respectively, as we believe both markets benefitted from more foreign patients arrival. In tandem with the growing topline, core PATAMI reported an 8% growth.

YoY. Revenue chalked a 9% improvement, supported by the recovery of non-Covid- 19 revenues, especially in Malaysia, whereby the patient footfall jumped 33% as patients return to seek treatment. Naturally the bill size in Malaysia also declined slightly, by 3%, as the hospitals treated less acute illnesses. The topline growth was also supported by the Gleneagles Hong Kong’s (GHK) ramp up as well as the acquisition of Bel Medic and Ortopedia. Despite growing topline, core PATAMI slid 23%, owing to (i) higher finance costs, (ii) higher depreciation and amortisation charges post MFRS129 adoption, and (iii) translation effects of weakening Lira.

YTD. Revenue was 5% higher, underpinned by growing contribution across all key markets (Malaysia: +17%, Singapore: +2%, India: +4%, Turkiye & Europe: +3%). Post lifting of Covid-19 restrictions, inpatient admission for all markets grew (Malaysia: +35%, India: +4%, Turkiye & Europe: +7%), except for Singapore (-4%) as inpatient volumes was relatively strong in FY21, due to the handling of more Covid-19 patients. Effects of Singapore’s lower inpatient admission was cancelled out by the exceptionally strong jump in bill size (+26%) due to better case mix. Core PATAMI declined 6% due to the same reasons mentioned in the YoY para.

Outlook. Acibadem had in February acquired 100% of Kent Health Group for c.EUR55m, marking its first foray into Turkiye’s largest city, Izmir. Kent Health Group (KHG) operates the 340-bedded Izmir Kent Hospital, together with two other medical centres in the city. Similar to Acibadem, KHG is also a well-establish brand, serving the middle to higher class in Izmir. We do highlight that KHG’s EBITDA-margins are in the mid-teens range currently, lower than Acibadem’s recent 3-year average of c.24%. However, management is confident that it can be lifted to c.20%-level swiftly, which we believe will be via cost-efficiency and synergies reaped.

Forecast. Unchanged as 4Q22 results were in line.

Maintain BUY, TP: RM7.79. We maintain our BUY rating on IHH, with a higher SOP derived TP of RM7.79 (from RM7.75 previously), as we roll forward our valuation base to FY23.

Source: Hong Leong Investment Bank Research - 1 Mar 2023