Thursday, October 25, 2012
IHH Healthcare: Nomura initiates coverage with Reduce Call and TP RM2.81. House note that while it likes IHH’s diversified and growing franchise, losses from Mount Elizabeth Novena, the drag from its aggressive expansion and a rich valuation are likely to undermine its share price performance. At FY13F P/E of 41x and EV/EBITDA of 18x, believe that IHH is expensive. Add that IHH is apt to see drags from its aggressive expansion, especially with losses from Mount E Novena likely to continue into 2014F. With high mkt expectations built into IHH’s consensus earnings forecast and share price, think any disappointment could undermine the share price. House TP is below consensus of MYR3.39. Based on FY13F EBITDA estimate (adjusted for a 60% stake in Acibadem), IHH’s share price implies an EV/EBITDA multiple of 21x. This is compared with an average 15x for healthcare service providers in emerging markets and 6-9x in developed markets.