News on IHH

IHH Healthcare a global leader

IHH Healthcare Bhd
(Sept 11, RM3.09)

Initiate coverage with neutral rating at RM3.11 and target price of RM3.26: IHH currently ranks as the second largest listed private healthcare services provider in the world, based on market capitalisation.

It operates an integrated healthcare business and related services, with a global network of over 4,900 licensed beds in 30 hospitals, as well as medical centres, clinics and ancillary healthcare businesses across eight countries.

IHH focuses its operation on markets in Asia and Central and Eastern Europe, the Middle East and North Africa (CEEMENA), with leading market positions in its home markets of Singapore, Malaysia and Turkey, and growing presence in China, India, Hong Kong, Vietnam, Brunei and Macedonia.

Adding to its existing facilities, IHH has already mapped out an impressive expansion plan, with over 3,330 new beds in the pipeline to be delivered over the next five years.

These upcoming facilities comprise new hospital developments and expansion of its existing facilities.

In FY11, the CEEMENA region registered revenues of RM1.95 billion, which made up 37.5% of the total revenue of the group. This was followed by Singapore (36.9%), Malaysia (21.5%), and other markets (4.1%).

IHH’s earnings before interest, tax, depreciation and amortisation (Ebitda) grew 23% and 33.8% annually in the financial year ended December 31, 2010 (FY10) and FY11, translating into an Ebitda margin of 18.1% and 21.1% for the two years.

This was contributed mainly by a strong revenue growth, which grew 14.2% and 15.2% annually in FY10 and FY11, and better cost management. We believe the current management will be able to maintain its Ebitda margin above the 20% benchmark for the foreseeable future.

Due to its relatively large size relative to its competitors, we expect IHH to possess the advantage of being able to gain from its economies of scale.

Additionally, the synergy from the acquisition of Turkey’s Acibadem Hospital Group will give IHH the platform to benthe cost savings and pooling of resources to grow its profitability.

Therefore, we are attaching a 5% premium to IHH’s enterprise value (EV)/Ebitda multiple compared with its peers, pricing its EV/Ebitda at 18.4 times, with a fair value of RM3.26 per share. At the current price, we are of the opinion that IHH has already been fairly valued by the market. — MIDF Research, Sept 11

This article is appeared in The Edge Financial Daily on 12 September, 2012.