A Fortis hospital building is pictured in Gurgaon, India, May 11, 2018. REUTERS/Saumya Khandelwal
KUALA LUMPUR: CIMB Securities has taken a neutral stance on IHH Healthcare Bhd
’s 31.17%-owned associate, Fortis Healthcare, following its plan to acquire People Tree Hospital Yeshwantpur (PTHY) in Bengaluru for INR4.3bn (RM196m).
Fortis announced on Saturday that the deal will be executed by its wholly owned subsidiary, International Hospital, through a 100% acquisition of TMI Healthcare, the entity under which People Tree Hospital operates, Reuters reported.
The acquisition also includes an adjacent land parcel of about 0.8 acres, giving Fortis room to expand PTHY’s bed capacity to more than 300 beds from the current 125.
Fortis plans an additional investment of RM187mil over the next three years to upgrade bed infrastructure, medical equipment, and clinical programmes. This acquisition is expected to be completed by end-Jan 2026.
CIMB Securities estimates that, assuming an EBITDA margin of 19% in line with Fortis, the deal values PTHY at a trailing 12-month (as of March 2025) enterprise value-to-EBITDA (EV/EBITDA) multiple of 31x, representing a 30% discount to the listed peer average of 44x, which it views as fair.
“The acquisition will not have any impact on IHH’s net gearing given Fortis is accounted for as a single-line investment in subsidiaries on IHH’s balance sheet,” it said.
“We maintain our earnings forecasts, as the contribution from this acquisition is expected to have minimal impact on IHH’s FY26 earnings (approximately 0.1% at the group level).
“Nonetheless, we believe the acquisition aligns strategically with Fortis’s goal of expanding its bed capacity by 1,040 beds over 2026–28 (from 5,008 operating beds as at 2024),” CIMB said.
Overall, CIMB Securities said that while the move is strategically sound in terms of expanding Fortis’s footprint in southern India, it expects the share price reaction to the announcement to be muted.
IHH rose three sen, or 0.35% to RM8.55 with 96,700 shares traded at 9.55 am.
“We maintain our ‘buy’ call with an unchanged SOP-derived target price of RM9.40. IHH remains our sector top pick, supported by better earnings visibility from the rollout of new beds at Mount
Elizabeth Hospital (Orchard) post renovation, improved operating efficiency in India amid ongoing consolidation between Fortis and Gleneagles India, and rising medical tourism revenue contribution from its Malaysian operations,” CIMB said.
