Public Research: Covid-19 outbreak may impact IHH

UOBKayHian Research (UOBKH) said that it is trimming its 2020 and 2021 earnings estimates for the hospital group by 8% and 10% respectively to factor in the covid-19 outbreak impacting medical tourism, and adjust its margin assumptions.

PETALING JAYA: IHH Healthcare Bhd could be impacted by the Covid-19 outbreak that has spread around the globe currently.

According to Public Research, IHH’s hospitals might see lower foreign patient volume until the virus is effectively contained.

“Foreign patients with non-urgent medical conditions are less likely to travel for treatment and might delay treatment, ” it said.

UOBKayHian Research (UOBKH) said that it is trimming its 2020 and 2021 earnings estimates for the hospital group by 8% and 10% respectively to factor in the covid-19 outbreak impacting medical tourism, and adjust its margin assumptions.

“Over the near term, the covid-19 outbreak headwinds could weigh on operations, extending gestation of Gleneagles Hong Kong and Gleneagles Chengdu with potential broader implications across its whole operations, ” UOBKH said.

Meanwhile, Public Research said that construction works for Gleneagles Shanghai has been stopped by the local authorities, to stop the spread of covid-19.

“The stoppage might impact the scheduled construction completion and hospital opening, depending when the construction work can resume, ” it said.

Commenting on its latest fourth quarter results UOBKH said, IHH’s 4Q earnings of RM290mil which is lower by some 15% year-on-year brought 2019 core earnings to RM921mil.

“This was largely within our and consensus expectations, accounting for 97% and 101% of ours and consensus forecasts. Despite revenue being aided by its Fortis acquisition

and growth across all markets, full-year earnings contracted off higher interest expense and depreciation, ” it said.

UOBKH maintained its buy rating on IHH with a sum of parts-based target price of RM5.86 from RM5.93 previously in tandem with its lowered earnings.

“The target price implies a 48.6 times 2020 forecast price to earnings ratio (PER), below its historical 5-year, 12-month forward PE of 57 times, ” it said.

The research house further said that IHH’s valuations appear decent with its resilient yetdefensive three-year earnings (2019-2022 forecast) compounded annual growth rate of 14.9% and its sound track record.