IHH’s  9M13  earnings  were  in  line  with  our  and  consensus  estimates. While  inpatient  admittance  growth  is  strong  and  the  group’s  new hospitals  have  turned  EBITDA  positive,  the  stock  is  trading  above  its mean  1-year  forward  P/E  and  EV/EBITDA.  We  keep  our  forecasts, NEUTRAL  call  and  our  MYR3.87  FV  unchanged.  Our  FV  is  based primarily on an EV/EBITDA derived sum-of-parts valuation.

• Results in line. IHH reported a 9M13 core net profit of MYR460.5m that is in  line  with estimates, making up  71.8% of our forecast  and 70.0% of consensus  estimate.  Net  profit  fell  9.8%  y-o-y,  largely  due  to  the absence  of  c.  MYR194m  in  gains  it  enjoyed  in  2012  from  the  sale  of medical  suites  at  its  new  Mount  Elizabeth  Novena  hospital.  Excluding this, the group’s net profit would have risen  45.3% during the period. We expect  a stronger 4Q as  hospitals tend to  see  lower admittance volume during  the July-Sept  quarter, which  coincides  with  the  festive  period  in Malaysia and summer holidays in Turkey.
• Slow September quarter.  Q-o-q,  inpatient admissions  were  seasonally lower  in  Malaysia  (2.3%)  and Turkey  (7.3%)  while Singapore saw a 1% uptick  in  patient  volume  due  to;  i)  publicity  arising  from  its  move  to publish median rates and the cost breakdown for 30 of its most common procedures  and  ii)  increased  traction  at  its  Mount  Elizabeth  Novena hospital.  All  three  countries  enjoyed  5.6-7.5%  y-o-y  growth  in  inpatient admissions in tandem with their capacity expansion.
• New  hospitals  turning  around  and  stronger  4Q  seen.  Mount Elizabeth  Novena  has  been  EDITDA-positive  for  the  second  straight quarter while Turkey-based Bodrum & Ankara hospitals turned EBITDApositive  in  3Q.  All  operations  in  fact  performed  better,  reporting  y-o-y
• EBITDA growth with flat to low double digit margin expansion. Hence, we maintain our forecasts on anticipation of continued growth in 4Q.Maintain  NEUTRAL.  Despite  the  strong  earnings  growth,  IHH  is  now trading above its mean  1-year forward P/E and EV/EBITDA. We do not expect much in the way of dividends despite its growing cash pile as the group  remains  focused  on  growth,  and  plans  to  spend  MYR3.8bn  in capex from 4Q13 to 2016. Our SOP FV is unchanged at MYR3.87

Source: RHB

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Company Profile
IHH  is  an  international  leader  in  the  provision  of  premium  private  healthcare  services.  The  Group  currently  has  a   big  presence  in Malaysia, Singapore and Turkey.

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