Slightly Ahead of Expectations

• IHH Healthcare’s 3Q21 core earnings were up 48% y-o-y on stronger operational metrics across its operations. 9M earnings came in slightly ahead of expectations, making up 79% and 81% of ours and consensus’ full-year forecast, as the sequential moderation in 3Q21 revenue intensity and COVID-19 related revenues were not as severe as we initially expected.
• We raise FY21-23E earnings forecast for IHH Healthcare by +3% to account for this better-than-expected operational performances.

Stronger Operational Metrics

• IHH Healthcare's 3Q21 revenue grew by 26% y-o-y on the back of higher revenue intensity in Malaysia (+25%) and Turkey & EU (+22%), with the latter also seeing strong inpatient admissions of 12%, together with India (+29%). This has more than offset lower inpatient admissions in Malaysia (-11%) and Singapore (- 2%). COVID-19 related services also generated higher revenues in Malaysia and Singapore at 18-29% of total revenue (vs 12-24% in 2Q21) as the COVID-19 situation subsided much later vs Turkey & EU and India, both of which saw lower COVID-19 related revenues.
• IHH Healthcare however incurred higher costs in 3Q21 linked to higher manpower expense and lower government grants.

Likely Weaker 4Q21 Momentum

• We expect sequentially vaccination activities.

Marginally Raise Earnings

• We marginally raise our FY21-23E earnings foreast for IHH Healthcare by +3% to account for higher revenue intensity and COVID-19 related revenues, which did not decline as severely as we initially anticipated. We expect the easing travel restrictions, ongoing cost savings plan and diversification into EU markets to drive IHH Healthcare’s ROE enhancement going forward.
• Our SOP-derived target price is also raised to RM7.48. Maintain BUY.

Source: Maybank Kim Eng Research - 30 Nov 2021