AmInvest Research retains Buy on IHH with FV of RM6.25

KUALA LUMPUR: AmInvestment Research is maintaining its Buy call on IHH Healthcare with an unchanged fair value of RM6.25 a share.

It said on Friday its valuation was based on discounted cashflow with a weighted average cost of capital of 7%.

“IHH’s 9MFY20 core net profit of RM344mil (-46% YoY) is within our expectations, as we believe most of the year’s earnings will come in 4QFY20. The core net profit came up to 60% and 62% of our and consensus full year estimates, ” it said.

AmInvest Research favoured IHH for its: (1) strong recovery potential in 4QFY20 and FY21F; (2) expansionary outlook; (3) effective cost cutting and capital efficiency methods; and (4) its position in the premium segment of the private healthcare sector, translating to high EBITDA margins of over 20%.

Commenting on the third quarter results, revenue grew to RM3.518bil (-7.1% YoY, +37.2% QoQ) on the back of higher inpatient admissions and outpatient volumes across all markets as pandemic restrictions are loosened.

AmInvest Research said that it was also aided by Covid-19- related revenue sources and the recovery of foreign patient volumes in Acibadem, Turkey.

IHH’s 3QFY20 core EBITDA climbed to RM1.022bil (+16% YoY, +379% QoQ), largely due to tight cost control and receipt of government grants and reliefs.

All regions experienced improvements in revenue, EBITDA, EBITDA margins and inpatient admissions.

Notably, Singapore provided a significant 42% of 3QFY20’s EBITDA. This is through government grants worth 11% of segmental EBITDA and its high inpatient revenue/admission value.

“Generally, occupancy rates and inpatient volumes are expected to improve over the course of 4QFY20 and 1QFY21.

“Despite a lack of foreign patients, inpatient revenue per admission remains elevated due to a higher case mix of pricier elective and acute cases, ” AmInvest Research said.

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