PETALING JAYA: Analysts remain upbeat on IHH Healthcare Bhd
’s business prospects in Penang, driven by the affluent population and the state’s thriving health tourism sector.
IHH completed the acquisition of Island Hospital (IHSB) last month, which helped solidify its position alongside Gleneagles and Pantai Hospital in Penang, noted RHB Research.
Following a visit to IHH’s hospitals in Penang, the research house said it was “pleasantly surprised” by IHSB’s pioneering role as the top health tourism hospital in Penang.
“Its foreign-to-local patient mix of 60%:40% is a key testament to providing the best-in-class patient outcome for healthcare travellers.
“Given the proximity between IHSB and Gleneagles Hospital Penang (GHPG) being just a stone’s throw away, management sees ample opportunity to transfer part of the high-intensity patients to IHSB, given GHPG’s bed occupancy rate is already at 80%.”
Citing data from the Statistics Department, RHB Research noted that Penang is one of Malaysia’s most densely-populated states with 1.8 million residents and has the fifth highest average household income in the country.
“The state is not only a major tourist destination, but has also become the most established health tourism spot in Malaysia.”
It noted that pre-Covid-19 pandemic, Penang generated health tourism revenue of RM750mil – accounting for 45% of the country’s health tourism revenue.
“A key factor of Penang being a top health tourism destination is its cultural similarity to Medan, Indonesia (the majority of residents in both areas are descendants of immigrants from Fujian, China and speak the Hokkien dialect).
“This is on top of the short travelling distance between the two cities, as well as the availability of medical tourist-friendly hotels.”
The acquisition of IHSB was completed on Nov 4, funded via the issuance of a sukuk (100% debt) amounting to RM4bil.
“All else being equal, we expect IHSB to contribute 20% of IHH’s Malaysia earnings before interest, taxes and amortisation (Ebitda) in 2025, driven by a projected 40% Ebitda growth next year. We expect IHSB to be earnings-accretive by 2026 (after accounting for depreciation and finance cost of RM260mil),” said RHB Research.
For the third quarter ended Sept 30, 2024 (3Q24), IHH’s net profit came to RM534mil, slightly improved from RM532mil in the year-ago quarter, while earnings per share rose to 6.06 sen from 6.04 sen previously.
The group’s revenue dipped to RM5.64bil from RM5.83bil in 3Q23 due to the effects of the MFRS 129 reporting standards.
Meanwhile, IHH’s net profit in the nine-month period ended Sept 30, 2024 (9M24) was RM1.93bil, below the RM2.22bil in 9M23, while revenue rose to RM17.69bil from RM15.64bil in the comparative period.
The lower net profit during the period was due to the one-off gain of RM873mil from the sale of International Medical University in the previous year.
In a Bursa Malaysia filing following its 3Q24 financial results announcement, IHH said it is poised to meet the increasing demand for quality healthcare services in light of the growing healthcare needs both locally and from around the region.
As a group, IHH said its network of hospitals across its key markets will further enhance clinical offerings. “The group’s strategic priorities include developing new engines of growth and turning around underperforming assets,” it said.
