IHH Healthcare: A Postcard From Istanbul

Kenanga Research (Kenanga) cited their visit to four key Acibadem hospitals in Türkiye and were  impressed by their state-of-the-art medical equipment, and  ambience akin to that of 5-star hotels. In fact, IHH’s Acibadem  brand has set the benchmark for private healthcare service  excellence in Turkiye and Central and Eastern Europe.

As a result, Kenaga maintains an Outperform call forecasting a TP on IHH Healthcare of RM7.00 from its current selling price of  RM5.97.

Hosted by  IHH Istanbul, the key representatives include Mehmet Ali Aydinlar  (Chairman, Acibadem Saglik Yatirimlari Holding A.S. (ASYH) and Evren  Gence (Deputy CEO, Strategy and Business Development, ASYH).

Istanbul, the vibrant and culturally rich city straddling between Europe  and Asia, has emerged as a prominent hub for health tourism,  leveraging on its rich history, vibrant culture, and warm hospitality.  Patients and their companions can explore iconic landmarks like the  Hagia Sophia, Topkapi Palace, and the Blue Mosque, immersing  themselves in the city’s unique blend of Eastern and Western  influences. 

Briefly, Acıbadem Healthcare Group began its journey into healthcare  services as a small neighborhood hospital in a district of Istanbul. For  example, Acibadem Atasehir where Atasehir is a district in Istanbul.  Fast forward, Acıbadem is a global chain operating in five countries  including Turkiye, Bulgaria, Macedonia, Serbia, and the Netherlands  with 24 hospitals and 14 outpatient clinics. 

Foreign patients accounted for 23% in of Acibadem Türkiye’s top line in FY22, up from 16% in FY19. Acibadem Türkiye capitalises on Türkiye being bounded on the north by the Black Sea, on the northeast  by Georgia and Armenia, on the east by Azerbaijan and Iran, on the  southeast by Iraq and Syria, on the southwest and west by the  Mediterranean Sea and the Aegean Sea, and on the northwest by  Greece and Bulgaria.

In 1HFY23, foreign patient revenue contribution fell to 17%, lower than  the 23% in 1HFY22 due to the Türkiye earthquake, festive holidays and  presidential elections. 1HFY23 foreign patient volume declined by an  estimated 20%. Typically, foreign patients account for 5% of patients  but contribute 23%-25% of revenue in Türkiye. The group is not  perturbed by the lower contribution from Acibadem in 2QFY23 due to  the festive holidays compounded by long week-end holidays as well as  presidential election. Viewed as a temporary blip, it expects patients to  return in subsequent quarters as already seen starting from July.  Specifically, the group aim to make medical tourism convenient and  reliable for thousands of international.

Türkiye healthcare briefly explained. Healthcare in Türkiye consists of a mix of public and private health services. Acibadem is  the largest private healthcare provider in Türkiye in terms of private patient revenue. Türkiye has a Universal Health Insurance  (UHI) scheme that is provided by the Social Security Institution (Sosyal Guvenlik Kurumu – SGK). The UHI scheme provides  comprehensive health care coverage through public hospitals including public university hospitals to all residents including  foreigners who are working in the country. Within its network, certain hospitals operated by Acibadem Group depending on certain  parameters (such as availability of complex cancer treatment as well as organ transplant) have executed the SGK Agreement.  Those who are covered by SGK may also receive healthcare services in private hospitals that have agreements with SGK. In  addition to the private hospitals, private medical centres may also enter into the agreement with SGK. 

Currently, private hospitals can only have SGK agreement on a full scope basis. Under full SGK agreement, all clinical areas/departments within the private hospital can be utilized to serve SGK patients. In return, private hospitals may charge a  premium (up to 200%) on top of the SGK tariff, plus additional charges for amenities.

Even after accounting for such premiums, fees paid by full SGK patients are generally lower than that of non-SGK patients. Individuals who seek additional medical services  from the private healthcare which are not contracted under SGK need to pay their medical expenses out-of-pocket, if they do not  have private health insurance coverage. Furthermore, the private hospitals are not bound by these price caps when serving non SGK patients, Kenanga said in Company Update note today (Oct 18).

Despite the universal health care, total expenditure on health as a share of GDP is the lowest among OECD  countries at about 5% of GDP, much lower than the OECD average of 9.3%.

The median age in Türkiye is 30 years compared to  43.9 years average in EU countries. Aging population is the prime reason for higher healthcare expenditure in Europe with an  average life expectancy of 77 years compared with the EU of 81 years. Generally, 67% of the population use private hospital, 24%  goes to public hospitals, and 9% visit university hospitals. Türkiye has a population of 85m and Acibadem has presence in four of  the five most crowded cities representing 34% of the Turkish population. These four most crowded cities constitute 50% of the  GDP of Türkiye’s economy. (Istanbul, Ankara, izmir, Bursa).

Kenanga visited four key Acibadem hospitals in Türkiye, which are:

i) Acıbadem Ataşehir Hospital, the most recent investment of the Group, is the 18th hospital of the Group in Türkiye and the 24th  hospital at global scale. The hospital lobby area is the welcoming heart of the building, offering a comfortable and soothing  environment upon arrival. A digital, data-informed artwork of blooming flowers by local artists, Hakan & Suleyman Yılmaz reflects  the 145,580 newborns delivered at Acibadem’s network of hospitals and concurrently creating a visually therapeutic lobby  experience while celebrating the hospital’s work and the patient experience that is inextricably part of it .Acıbadem Ataşehir Hospital  is distinguished by specialized and experienced physicians, state-of-the-art devices used for diagnosis and treatment as well as  the Command Center that uses artificial intelligence and digital infrastructure for management of the hospital and the ‘Environment  Friendly” Hospital status with Leed Gold certificate. It has an indoor built-up area of 65,000 square metres with a capacity of 300  beds that is located adjacent to Acıbadem Holding headquarters and commenced operations in Sept 2022. The hospital has 53  observation beds, including 12 in Emergency Observation Unit, 13 Endoscopy – Angiography observation beds, 6 in Pediatric  Observation Unit, 5 in IVF Unit and 15 Multidisciplinary observation beds.

It is designated as a general hospital, where specialized services are delivered in all departments/centre of excellence. Pediatrics  and Oncology Departments are positioned as a clinical facility with independent entrance nearby the hospital building. The hospital  has the following departments: Gynecology and Obstetrics; IVF; Perinatology; Cardiology and Cardiovascular Surgery; Medical Oncology with a chemotherapy hall that has 34 boxes; Radiation Oncology equipped with state-of-the-art devices; Nuclear  Medicine Unit; Physical Medicine and Rehabilitation; Internal Medicine; Gastroenterology; Infectious Diseases; Orthopedics;  Neuro-ophthalmology; and Interventional Radiology. 

There are 142 standard rooms that are designed to meet the needs of patients and their relatives. Mini-bar, television, internet and  private safe are available in-patient rooms which meet all the basic needs of patients and relatives. There is one two-seater sofa  in each room to help family members rest.

ii) Acibadem Altunizade is the 21th hospital of Acıbadem Healthcare Group which commenced operations in Altunizade in March  2017. Acıbadem Altunizade Hospital comprises many full-featured units along with the technical infrastructure, medical technology,  professional healthcare personnel in all branches and multidisciplinary approach. The hospital has a built-up area of 98,000 square  meters with capacity of 350 beds, 18 operating theatres, 75 intensive care unit beds and parking lot with capacity of 550 vehicles.  A key distinguishable feature in Acibadem Altunizade is seamless connectivity amongst its operating units within the building. With  a special hospital architecture highlighting patient comfort, time is saved by minimizing the walking steps between units for the  patients. Examination, diagnosis and treatment are planned and practiced in many featured units and outpatient clinics including  Breast Health, Ophthalmology, Spinal Health, Neurologic Sciences, Neuro-radiosurgery, Oral and Dental Health. Thus, patients  receive services comfortably within a short time. Many specialized units from Oncology Unit to Neurosurgery from Cell Therapy to  Robotic Surgery are located in the hospital.

iii) Acıbadem Maslak Hospital is located in Istanbul’s business and finance centre Maslak which can be reached via highway and  metro rails. Put into service in 2009, Acıbadem Maslak Hospital increased the service area by 2.5 folds, after a new building  (60,000 square metres) was added to the hospital within the scope of an enlargement project that was finalized in 2018. Fast  forward, Maslak Hospital presently covers an indoor area of 106,000 square metres with JCI accreditation that certifies quality  systems of healthcare organizations. There are 385 patient rooms in Acıbadem Maslak Hospital, including 221 standard rooms.  Acibadem Maslak Hospital has 20 general surgery operating theatres, two IVF procedure theatres and 27 intensive care beds.  The hospital has all the necessary advanced technological equipment ranging from three Tesla MRI, 3-dimensional imaging for  prostate cancer, 4D ultrasound, Positron emission computed tomography, force CT, trilogy, cyberknife, robotic arm angio, navio  robots, laser, to 4-D breast ultrasonography and many others. Specifically, Acibadem Maslak pride itself for its several best in class  equipment including “Direct Accelerator (LINAC) Trilogy” gear which limits the danger of negative effect on typical tissue in  malignant growth treatment; the “RapidArc” (Volumetric Modulated Arc Therapy)” innovation which decreases brief disease  medications to two minutes; the “CyberKnife” which is utilized securely in the treatment of tumors that can’t be treated with ordinary  radiotherapy; the “da Vinci SI” robot which performs laparoscopic strategies with automated medical procedure and the world’s quickest and most reduced radiation figured tomography “Streak CT” which can play out a heart angiogram in 0.25 seconds, and  a full body tomography in four seconds work in this clinic.

iv) Acıbadem Fulya Hospital is located in one of “the most central “quarters of Istanbul and easily accessible within the city.  Acıbadem Fulya Hospital offers administrations which have any kind of effect especially in the territories of sports medication,  orthopedics, non-intrusive treatment and traumatology. With these traits, it is a possibility for it turning into the main benchmark  association in Türkiye, and one of a minor not many players on the planet. Best in class instruments utilized at the clinic incorporate  the 1.5 Tesla MR, which is characterized as “semi-open”, can without much of a stretch be used by claustrophobic patients and  overweight patients; new age ultrasonography gear and computerized all encompassing x-beam. Besides, notwithstanding routine  analytic investigations with the 128 indicator double vitality CT, progressed heart imaging, coronary CT angiography, CT colonoscopy and CT-bronchoscopy can likewise be performed.

APM, an integral part of Acibadem hospitals. Interestingly, as an integral part of the entire healthcare spectrum from  conceptualisation of a hospital to the finish product i.e. completion of the entire hospital built-up, Acibadem has its own internal  project management entity which is known as the Acıbadem Project Management (APM) group. From the medical equipment  installation, APM offers project management services by conducting all stages including planning & design to commissioning and  processes of the project by using state of art technologies with its team of experts, local and global solution partners. APM aims  to create digital twins of healthcare structures by using contemporary methods effectively in design and implementation activities. It is now an independent company that serves all investment areas. Acıbadem Project Management offers a complete project  management service, including contract preparation, testing, and full management of the construction in cooperation with its  professional team and domestic and foreign solution partners, with the aim of predicting and managing risks that may arise at any  stage of the project process, including investment decision-making. The key projects undertaken by APM includes Acibadem Atasehir, (Design, Construction, Medical Planning, Project Management, Medical Equipment Procurement), St.Petersburg Multi Functional Medical Center, Acibadem Maslak 2 Hospital and AcıbademAltunizade Hospital.


Kenaga keeps to their SoP-TP of RM7.00 with no adjustment to the TP based on ESG given a 3-star rating as appraised by the research house.

Kenanga likes IHH for: (i) the bright prospects of the private healthcare sector in Malaysia underpinned by rising affluence and  ageing population; (ii) its pricing power, as the inelastic demand of healthcare provides it with the ability to pass cost through amidst  rising inflation, and (iii) its commanding market position in the private healthcare space with presence in Malaysia, Singapore, Türkiye and Greater China.

Key risks to their call include: (i) regulatory risk, (ii) risks associated with overseas operations, and (iii) the lack of political will to roll  out a national health insurance scheme.

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