KEY INVESTMENT HIGHLIGHTS

• 4QFY19’s normalised earnings declined by -15.1%yoy to RM289.8m

• FY19 normalised earnings came in at RM920.6m which is below ours and consensus’ estimates

• Overall earnings was dragged by higher finance and tax costs

• First and final dividend declared of 4.0sen per share

• Maintain BUY with a revised TP of RM6.45 per share

Below expectations. IHH Healthcare Bhd (IHH) has reported 4QFY19 earnings of RM40.6m. Excluding the exceptional items such as impairment loss due to Global Hospitals, 4QFY19 normalised earnings came in at RM289.8m (-15.1%yoy) while full year FY19 normalised earnings came in at RM920.6m (-10.4%yoy) which is below ours and consensus’ estimate of full year FY19 forecast at 92.2% and 87.6% respectively. While core performance remained intact, the 4QFY19 earnings was dragged by the higher finance and tax costs.

Singapore and Malaysia continue to anchor group’s performance. In 4QFY19, both Singapore and Malaysia markets continue to support the group’s overall performance with total revenue growth of +8.0%yoy and +12.0%yoy respectively. The revenue intensity per inpatient rose by +4.3%yoy and +7.7%yoy respectively driven by the strong organic growth from existing hospitals. Furthermore, we expect the acquisition of Prince Court will contribute positively to the segment’s earning post completion of its acquisition by May 2020 (pending regulatory approval).

Despite external headwinds, Acibadem remain resilient. Acibadem’s performance has been impacted by the drop in local patient (from social insurance scheme) at its non-Istanbul hospitals. Nevertheless, Acibadem Holdings’ 4QFY19 revenue increased by +11.0%yoy due to the: (i) continuous ramp up of Acibadem Altunizade Hospital (opened in March 2017); (ii) increased capacity from Acibadem Maslak Hospital (expansion completed in October 2018); and (iii) increase in foreign patients.

Fortis made continued progress since acquisition. Since its acquisition in November 2018, Fortis has made continued progress in improving operational and financial performance. In 4QFY19, it reported a PBT for four straight quarter of about RM28.1m in comparison to a loss of about RM70.0m for Q4FY19 of thanks to a discipline turnaround plan by the new management.

Source: MIDF Research - 2 Mar 2020