IHH’s 1QFY23 met expectations. Its 1QFY23 topline grew 24% driven by the return of both local and foreign patients, and generally higher inpatient admissions and yields. This was further boosted by its enlarged operations scale backed by the opening of Atasehir Hospital, the expansion at Gleneagles Hong Kong hospital and the acquisition of Ortopedia hospital. We maintain our forecasts, TP of RM7.00 and OUTPERFORM call.

1QFY23 core net profit of RM355m came in at 21% of both our full-year forecast and the full-year consensus estimate. We consider the results within expectations as we expect patient throughput to continue to rise during the remaining quarters.

YoY, 1QFY23 revenue increased 24% driven by the return of both local and foreign patients, the opening of Atasehir Hospital, the expansion at Gleneagles Hong Kong hospital and the acquisition of Ortopedia hospital. Overall, its inpatient admissions were largely higher across the board -higher in Malaysia (+41%), Acibadem (+14%) and India (+8%) but lower in Singapore (-2%). Revenue per inpatient rose in Singapore (+12%), Acibadem (+44%) and India (+15%), but was lower in Malaysia (-1%).

EBITDA only rose 15% due to higher operating expenses, particularly, staff cost. However, 1QFY23 core net profit came in lower by 12% due to lower contribution from Singapore and Acibadem. No dividend was declared in this quarter as expected.

Outlook. Looking ahead into 2023, we expect IHH’s revenue per inpatient growth of 10%-15% (vs. 18% in 2022 due to low base effect in 2021), inpatient throughput growth of 10%-15% (vs. 10% in 2022) and bed occupancy rate (BOR) of 60%-73% (vs. 56%-70%% in 2022) for its hospitals in Malaysia, Singapore, India and Turkey. We believe the key growth factor for its inpatient throughput and BOR will be the return of elective surgeries and medical travel, the addition of new beds (previously constrained by staff shortages) and the first full-year contribution from Ataşehir hospital in Acibadem

Forecasts. We maintain our forecasts and SoP-TP of RM7.00 (see Page 2).There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 3).

We continue to like IHH for: (i) its pricing power, as the inelastic demand of healthcare provides it with the ability to pass cost through amidst rising inflation, (ii) the strong recovery in patient throughput, from both domestic and international markets as the pandemic comes to an end, and (iii) its commanding market position in the private healthcare space with presence in Malaysia, Singapore, Turkey and Greater China. Reiterate OUTPERFORM.

Key risks to our call include: (i) regulatory risk, (ii) risks associated with overseas operations, and (iii) the lack of political will to roll out a national health insurance scheme

Source: Kenanga Research - 1 Jun 2023