IHH

IHH (S$2.14): 3Q15 in line; Supported by stronger SGD

IHH delivered a 3Q15 core net profit of RM222.7m (+26.4% y/y) on strong SGD/MYR, although headline net profit (-19.3% to RM118.5m) was eroded by FX losses (RM217.1m) from non-Turkish Lira borrowings of Acibadem. This lifted 9M15 core earnings to RM684.6m or 72.5% of full-year consensus estimate.

Revenue jumped 15.7% to RM 2.06b, mainly on improved contributions from Parkway Pantai (+19%), Acibadem (+11%) and PLife REIT (+17%), while overall EBITDA margin narrowed 0.8ppt to 23.1%.

Segmental breakdown:

Parkway Pantai – Revenue and EBITDA soared to RM1.29b (+19%) and RM310.2m (+15%) respectively, largely underpinned by the continuous ramp up of Mouth Elizabeth Novena Hospital in Singapore and a stronger SGD, while a spike in revenue/patient (+9.6%) in Malaysia mitigated a decrease in inpatient admissions amid the introduction of GST and a general slowdown in consumption.

Acibadem – Top line growth (+11% to RM686.7m) remained strong, albeit partially dragged by a weaker Turkish Lira, given its robust operations in existing hospitals and added contribution from the more recent Acibadem Atakent Hospital. EBITDA (+5% to RM93.4m) grew at a slower pace, weighed by provision of overdue receivables and pre-operating loss from Taksim Hospital.

IMU Health – Revenue came in flat as a hike in tuition fees was doused by a lower intake for its medicine programme. EBITDA decreased by 9% due to higher expenses for marketing, staff, repair and maintenance.

PLife REIT – Revenue and EBITDA surged 17% and 16% respectively amid additional contribution from nursing homes acquired in 4Q14 and 2015, as well as a strengthening SGD.

Going forward, IHH expects sufficient capacity to support growing demand for private healthcare services across its home markets, but operation costs are likely to creep up due to higher staff cost as competition for healthcare personnel stiffens, and the impact of GST implementation in Malaysia.

Moreover, the healthcare group is also expecting currency volatility to persist.

IHH Healthcare is currently trading at 55.8x forward consensus P/E and 2.6x P/B.

Maybank-KE maintains Hold with an unchanged TP of RM6.35.