• Maintain BUY (TP: RM8.60). IHH’s 9MFY24 revenue increased by 12.7% YoY to RM17,691mn driven by consistent growth in patient volume and the handling of more acute and complex cases across all markets. The better performance was supported by strong revenue growth from across key markets in 9MFY24 (Singapore: +13% YoY, Malaysia: +12% YoY, India: +15% YoY, Greater China: +20% YoY, Turkiye & Europe: +20% YoY). Consequently, IHH reported a higher 9MFY24 core net profit of RM1,368mn (+34.9% YoY) which exceeded our expectations but was in line with consensus, accounting for 87% and 72%, respectively. The positive deviation was due to stronger-than-expected revenue contributions across all markets. We maintain a BUY call with a higher TP of RM8.60 (up from RM7.88), in line with the earnings adjustment. Our valuation is based on a SOP approach with a WACC of 7% for Parkway Pantai Limited and 11% for Acibadem.

• Key Highlights. Zooming on the hospital and healthcare segment, revenue increased by 16% YoY to RM17,161mn in 9MFY24. The revenue growth was driven by continued demand for quality healthcare services, a higher proportion of acute patients, and price adjustments made to mitigate inflation. At the EBITDA level, all major operations showed improvement.

• Earnings Revision. We revised our FY24-26F earnings forecast upward by 17.9%, 11.1%, and 6.5%, respectively, following an increase in our revenue growth assumptions across all key markets.

• Outlook. We maintain a positive outlook on IHH, anticipating sustained demand growth fuelled by rising patient volumes and ongoing demand for surgical procedures. Looking at IHH’s Turkey operation, it is worth to note that the group ramped up renovations across its Turkish network, resulting in a slight reduction in bed capacity (3-5%) but they maintained stable EBITDA margins. On top of that, there was an increase in medical tourism, with foreign patient business contributing 17% to the top line, up from 13% in 1Q24. This growth was partly driven by more complex cases and a 3% increase in foreign patient volume. Additionally, the company has not seen any impact from the geopolitical tensions in the Middle East and does not anticipate any issues.

Source: BIMB Securities Research - 29 Nov 2024