IHH Healthcare (IHH) reported a slip in earnings by -54.2%yoy and -58.9%qoq to RM251.8m. For the cumulative 9 months, earnings dropped -3.7%yoy to RM1.36b, which came in below our expectation at 65% of one-year earnings forecast but above consensus’ at 83%.
The healthcare group’s revenue increase +3%yoy. Revenue added +3.4%yoy and +5.1%qoq to RM4.6b. For the cumulative 9 months, revenue gained +3.7%yoy to RM13.13b.
Hospital and Healthcare. This division reported a rise in revenue by +3.7%yoy and +5.5%qoq to RM4.5b, while EBITDA slipped -16.6%yoy but gained +189%qoq to RM1.81b. Cumulative for 9MFY22, revenue increased +3.8%yoy to RM12.83b, but profit declined -3.3%yoy to RM2.95b.
The growth in revenue was mainly due to factors like strong recovery from non-COVID-19 revenues; continuous ramp-up of operations at GHK Hospital; and acquisitions of Bel Medic and Ortopedia.
The de-growth factors were lower contribution from Covid-19 related services; disposal of Continental Hospitals; China lockdowns; and weakening Turkish lira.
IMU Health. Revenue slipped -9.3%yoy and -13.3%qoq to RM60m, while earnings dropped -24.5%yoy but increased 64.8%qoq to RM32.2.
Cumulatively for 9MFY22, revenue was up by +1.2%yoy to RM191.7m but earnings declined -6.3%yoy to RM65.4m. The decrease in revenue was mainly due to a lower student admission, offset by increased campus activities.
PLife REIT. Revenue slipped -2.3%yoy and -0.7%qoq to RM92.3m, while earnings slipped -49.9%yoy but gained +10.2%qoq to RM81.2m. Cumulatively for 9MFY22, revenue increased +1%yoy to RM279.9m, while earnings dropped -27.4%yoy to RM217.6m. The lower revenue
was mainly attributed to lower revenue contribution from its properties in Japan with the depreciation of the Japanese Yen.
Revise FY23-24 earnings forecasts. In consideration of IHH’s earnings coming below MIDF’s expectation, it has revised its earnings forecast for FY23 and FY24 slightly downwards by -8% and -4% respectively. It has also revise our target price to RM7.65 per share (previously RM7.96); pegging a PER of 31.3x to a revised EPS23 of 24.5sen. The PER is based on the company’s 5-year average.
MIDF Research has maintained BUY rating on IHH with a revised target price of RM7.65 per share. Despite its optimism regarding IHH’s financial performance in the coming quarters, in light of the rise of inpatient visits and increased BoR attributable to the full uplift of border restrictions, it is believed that global inflation and rising interest rates, as well as shortages in the medical equipment supplies, continues to have significant impact to its operation costs.
Nevertheless, the research house reiterates its positive stance on IHH for its financial resiliency and capability to mitigate against headwinds.
