IHH has proposed the acquisition of a 73.4% stake in Global Hospitals (Global), India for INR12.8bn (MYR819m), implying a FY15 EV/EBITDA of 18-24x. Maintain BUY on IHH with a SOTP-derived TP of MYR6.70 (14.5% upside). While earnings contribution from Global is expected to be minimal in the near term, we believe the acquisition would pave the way for further growth in India while enhancing IHH’s medium to long termearnings growth profile.

IHH goes Global in India. IHH announced a proposed acquisition of a 73.4% controlling stake in Global for INR12.8bn (MYR819m), which implies FY15 EV/EBITDA multiples of 18-24x (based on low teens EBITDA margin for Global’s FYE Mar 2015). This is somewhat similar to Apollo Hospitals’ (APHS IN, NR) valuation of 22-24x FY15/16 EV/EBITDA (IHH owns a 10.8% minority interest in Apollo). We view the acquisition positively as it offers IHH a solid platform for further growth in India. The price paid for Global includes an equity infusion of INR2.65bn of which INR300m would go toward retiring existing debts while the rest is allocated for capex.

Global Hospital. Global operates a chain of five hospitals with 1,100 beds, targeting the premium segment across India’s key major cities: Mumbai, Hyderabad, Bangalore, and Chennai. Its renownedtertiary/quaternary services, specialise in upper Gastrointestinal (GI),Hepatobiliary and multi-organ transplants. Its doctors are salaried (akin to Acibadem’s model); doctors there can practice without the need to register to a specific hospital.

Other highlights: i) the acquisition is expected to complete in threemonths, ii) IHH’s shares would be given out as incentives to retain key doctors, and iii) plans are underway to increase the bed capacity to 1,900 over the next five years.

Forecasts. No changes to our forecast pending the completion of the acquisition and further clarity on Global’s financials.

BUY with TP of MYR6.70. We like IHH for its resilient earnings growthprofile, underpinned by the SGD exposure that provides a buffer againstpotential EM currency weaknesses. IHH trades at an undemanding 1.1xPEG backed by strong earnings growth CAGR of 24% over FY15-17F.