IHH’s 2Q15 core profit grew a solid 22.3% YoY while 1H15 was up 27% YoY to MYR462.3m, in line with our FY15 forecast at 46%. Maintain BUY with a lower MYR6.70 TP (+17% upside; from MYR7.00) on higher risk premium for its Malaysia operations. We like the stock for its resilient earnings growth which makes it a compelling investment case amidstthe inherent local and domestic uncertainty while its rich valuations are justified by its strong 20% earnings CAGR over FY15-17F.

Strength to strength. IHH’s 2Q15 core profit grew by 22.3% YoY to MYR234.6m on higher complex case-mix resulting in better operating leverage achieved. Per Figure 1, revenue sustained at over MYR2bn (+12.2% YoY) on the back of higher revenue intensity (+14.8% YoY)while collective inpatient volume across all three of its home markets grew marginally by +0.3% YoY (Figure 2). 1H15 core profit was up 27% YoY to MYR463.2m and was in line with our full year forecast at 46%.

Other highlights. The stronger SGD partially offset the loss from the TRY against MYR as revenue would have been stronger (at 14% YoY compared to 12% YoY) on a constant currency basis given the strong performance of its Turkish operation. Management refinanced Acibadem’s USD debt with a new facility – a mixture of 25% USD and 75% EUR-denominated debts. The first principal repayment is only due in 3 years while interest payments are made in the interim. This reduces the USD exposure at Acibadem and interest expense savings.

Forecast. No changes to our forecast.

Maintain BUY with a lower TP of MYR6.70 (from MYR7.00) due to ahigher risk premium of 6.7% (from 6.0%) we assign to its Malaysianoperation. While valuation is rich, it is backed by strong earnings growth CAGR of approximately 24% over FY15-17F. IHH’s share price has risen by 19% YTD and outperformed the KLCI by 29%. Amidst the gloomy backdrop of the global and domestic economy, we believe IHH’s resilient earnings growth makes a compelling investment case while its SGD exposure is a buffer against further weaknesses in EM currencies.