PETALING JAYA: IHH Healthcare Bhd
is looking to add about 300 beds over the next three to five years through ongoing asset enhancement initiatives (AEIs) across its hospitals.
The additional beds will be for Gleneagles Penang, Pantai Hospital Penang and its recently acquired Island Hospital, according to CGS International (CGSI) Research.
Construction is already underway at Gleneagles Penang, with completion expected by the first quarter of 2025 (1Q25).
This includes a 15-storey block to add 20-30 beds, along with a new wing featuring 22 beds.
At Pantai Hospital Penang, a two-phase expansion will increase bed capacity by 30% in each phase, with the first phase targeted for completion by 4Q25 and the second phase expected in 2029.
As for Island Hospital, Maybank Investment Bank (Maybank IB) Research noted that its acquisition included a seven-acre landbank, with development approvals for a 400-bed hospital wing, a 300-room medical suite and a 38-floor hotel.
The research house also noted that the acquisition offers cross-referral opportunities for IHH’s hospitals, which have been imputed into its forecasts.
Maybank IB Research maintained its “buy” call on the stock with an unchanged target price (TP) of RM7.97 a share.
It remains bullish on IHH, citing the current demographic shift towards wealthier, ageing populations as a key driver of growth in admissions and revenue, ensuring long-term prospects for private healthcare operators like IHH.
Maybank IB Research said IHH’s valuations are ripe for a re-rating in 2025, especially with the expected listings of Sunway Healthcare and Columbia Asia Healthcare.
However, there is a risk that these proposed listings will not be executed at valuations higher than IHH’s, limiting room for IHH’s valuations to re-rate, it added.
Meanwhile, CGSI Research kept its “hold” rating for IHH, amid near-term earnings headwinds, with a TP of RM7.75 per share.
It expects a relatively flat earnings per share growth of just 3.4% year-on-year in financial year 2025 (FY25) for IHH, following a one-off tax-break in Turkey in 1Q24.
The company’s Singapore operations, which contributed 35% of its earnings before interest, tax depreciation and amortisation in the first nine months of 2024, are likely to soften in FY25, due to accelerated AEIs at Mt Elizabeth Orchard, which will reduce its bed capacity by 100 to 690.
CGSI Research noted potential upside from higher revenue across IHH’s operations, but downside risk include slower repayment of its RM4bil sukuk for the Island Hospital acquisition and a slower return of patients to Mt Elizabeth Orchard.
