FY21 Core Net Profit (CNP) of RM1,595m (+123% YoY) beat our and consensus full-year forecasts by 13% and 6%, respectively. The positive variance from our forecast was due to better-than- expected performance in Acibadem and India. We highlight that India and Acibadem continued to post strong commendable bottom-line performances in 4QFY21. We upgrade our FY22E net profit by 11%. However, due to concerns over the Turkish Lira, we keep our SoP-TP unchanged at RM6.65. Reiterate Market Perform.

Key results’ highlights. QoQ, 4QFY21 headline revenue rose 1% due to recovery of patient volumes but this was negated by a sharp decrease of COVID-19-related revenue across all markets offset by a lower base in Malaysia due to movement restriction in 3QFY21. COVID-19 related services contributed between 6%-29% to 4QFY21 (3QFY21: 6%-29%) revenues from the Group’s operations in its home markets. EBITDA rose 2% due to higher government grant income and lower staff cost, offset by higher other operating expenses. Revenue per inpatient admission rose in Singapore (+11%), Acibadem (+3%) and India (+1%) but lower in Malaysia (-9%). Inpatient admission rose in Malaysia (+18%), India (+1%), Acibadem (+11%) but declined in Singapore (-3%). This brings 4QFY21 Core Net Profit (CNP) to RM441m (+23%) due to higher bottom- line contribution in Malaysia and India. A first-and-final dividend of 6.0 sen was declared which came in above our expectation.

YoY, FY21 revenue and EBITDA increased by 28% and 49%, respectively, as revenue intensity picked up as the lockdowns gradually eased, and to some extent, contribution from delivery of COVID-19 related services, ramp-up of operations in Hong Kong and consolidation of Prince Court Medical Centre. Overall, inpatient admission rose in Acibadem (+18%) and India (+19%) but declined in Malaysia (-4%). Similarly, revenue intensity was solid across the board with revenue per inpatient higher in Malaysia (+23%), India (+18%), Acibadem (25%) and Singapore (+6%) as more complex cases were undertaken. FY21 CNP was higher by 123% boosted by profits from Acibadem and India.

Outlook. Although patient volume is impacted by the resurgence of COVID-19 cases across the globe and various movement restrictions, the Group’s diversified earnings base across 10 markets provides resilience as key markets are at different phases of the COVID-19 pandemic. The Group has taken pro-active initiatives to partially mitigate the effects of lower patient volumes by improving case-mix and by providing COVID-19 screening services. We highlight that foreign patient revenues at the Group’s hospitals in Turkey have exceeded pre-COVID- 19 levels since 4QFY20 after Turkey reopened its borders on June 2020. In India, the group will continue to drive cost savings and ramp up productivity and increase bed occupancy ratio currently averaging at 60%. In India, specifically, non-COVID-19 related activities saw month- on-month recovery on inpatient admission.

We upgrade our FY22E net profit by 11% to take into account higher contribution from Acibadem and introduce our FY23E earnings.

Maintain MARKET PERFORM. Despite raising Acibadem earnings, we attached a lower PER of 15.5x from 17.5x for Acibadem to reflect concerns of weakness in the Lira. Consequently, we keep our SoP-TP of RM6.65. We like IHH for its strong management and well diversified earnings base across several markets. Key risk to our call is slower-than-expected recovery from the pandemic.

Source: Kenanga Research - 24 Feb 2022