A Fortis hospital building is pictured in Gurgaon, India, May 11, 2018. REUTERS/Saumya Khandelwal
PETALING JAYA: Analysts expect minimal impact on IHH Healthcare Bhd
’s earnings for next year (FY26) after the recent acquisition of People Tree Hospital Yeshwantpur (PTHY) in Bengaluru, India, by Fortis Healthcare for 4.3 billion rupees or about RM196mil.
IHH has a 31.17% stake in Fortis.
However, CIMB Research, which is “neutral” on the acquisition, said it believes the deal aligns strategically with Fortis’ goal of expanding its bed capacity by 1,040 beds between 2026 from 2028, from 5,008 last year.
“The acquisition’s enterprise value/earnings before interest, taxes, depreciation and amortisation multiple (based on our estimate) of 31 times represents a 30% discount to the 44 times of listed peers, reflecting PTHY’s relatively smaller size.
“We are ‘neutral’ on the deal, as its size is immaterial and the estimated earnings impact is limited to around 0.1% of IHH’s FY26 earnings,” added CIMB Research.
While the move is strategically sound and expands Fortis’ footprint in southern India, the research house said it anticipates IHH’s share price would see little reaction to the announcement.
Furthermore, the acquisition would not have any impact on IHH’s net gearing, as Fortis is accounted for as a single-line investment in subsidiaries on IHH’s balance sheet, the research house said.
CIMB Research, which maintained its earnings forecasts for IHH, has kept a “buy” call on the stock with an unchanged target price of RM9.40 a share.
IHH remained its top sector pick, supported by better earnings visibility from the rollout of new beds at Mount Elizabeth Hospital in Singapore after renovations, improved operating efficiency in India amid ongoing consolidation between Fortis and Gleneagles India, and rising medical tourism revenue from its Malaysian operations.
