IHH's strategic initiatives put it on growth path

KUALA LUMPUR: IHH Healthcare Bhd has reaffirmed its growth prospects as it rolls out new initiatives to enhance its segment margins, says Hong Leong Investment Bank (HLIB) Research.

Following an analyst briefing, HLIB said the healthcare group is on track to expansion as it seeks to add more than 2,000 beds to its system over the next three years, which includes 600 beds in Malaysia and 1,500 in India.

In Hong Kong, the Gleneagles hospital is targeting the addition of 50 to 100 beds to its current capacity of 360, depending on the demand for private healthcare.

The group will also focus on inorganic growth via acquisitions in its Turkiye and Europe markets although the recently acquired Izmir Kent Hospital in Turkiye has received approval to increase its plot size and expand.

There are also plans to enhance the earnings before interest, tax, depreciation and amortisation (Ebitda) margins at IHH's india operations, which have typically lagged behind other core markets.

HLIB said IHH is looking to enahnce India's Ebitda margin to about 20% via an aggressive recovery plan for Fortis, disposal of non-performing assets and a tight rein on cost controls.

Meanwhile, IHH has also introduced a newly disclosed segment referred to as "labs" in 1Q23.

According to HLIB, the lab-testing business is a dominant market leader in most of IHH's core business and has always been a valuable revenue generator.

"Although this segment experienced a sharp revenue decline from 2Q22 onwards due to the decline in Covid19 related revenue, it has however managed to deliver remarkable growth in non-Covid revenues (+26% y-o-y) in 1Q23," said the research firm.

It said the segment will also be focused on enhancing its Ebitda margins via higher-end tests, improving core efficiency in labs and expanding its outreach efforts.

On high-tech and future-proofing initiatives, HLIB said IHH has also been making small venture investments in the health-tech space.

Among the venture investments made are intellect (focuses on mental wellness), lucence (precision oncology diagnostic and care), Us2.AI (AI-enabled echocardiography) and Doctor Anywhere (tech-driven healthcare platform).

"Its investment in Lucence allows IHH early entry to develop more accessible and less invasive diagnostics for oncology (one of the important verticals for IHH).

IHH is also collaborating with Lucence to launch Asia’s first multi-cancer early-stage screening liquid biopsy test, LucenceINSIGHT, in IHH’s Malaysia, Singapore and Hong Kong hospitals and labs.

HLIB maintained its "buy" call on IHH with a target price of RM7.62.

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IHH Healthcare , HLIB , healthcare , hospital


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