KUALA LUMPUR (June 1): RHB Research upgraded the earnings forecasts and target price of IHH Healthcare Bhd as the regional medical group’s performance beat market expectation in the first quarter ended March 31, 2021 (1QFY21).
RHB Research analyst Alan Lim commented that IHH Healthcare’s 1QFY21 earnings were better than his expectations due to the group’s diversification outside Malaysia.
Lim tweaked the earnings forecast for the financial year ending Dec 31, 2021 (FY21) to FY23 by 3%-9%, to reflect the latest audited financial figures. He revised upwards the revenue intensity assumptions for Turkey, Malaysia and Singapore, but revised downwards the in-patient admission assumption for Malaysia.
“IHH Healthcare’s 1Q21 earnings beat expectations due to the strong earnings recovery in Singapore, India, and Turkey. We remain optimistic on its inherently diversified operations to ward off short-term hiccups, and its prime position to ride on the demand recovery as vaccination efforts ramp up globally,” he added.
Lim maintained his “buy” call on the stock and revised up his target price (TP) from RM6.15 to RM6.55.
Lim noted that the higher sum of part (SOP) derived target price is based on 22 times of FY22F EV/EBITDA on its hospital operations in Singapore, Malaysia and Turkey and 10 times IMU Health respectively.
“We value its stake in Fortis Healthcare and Parkway Life REIT at current market price,” he explained.
According to Lim, IHH Healthcare is benefitting from efforts in providing Covid-19 related services despite the minimal contributions from medical tourism. The group is also benefiting from diversifying into markets such as Turkey, the EU and Singapore where there are rising occupancy levels.
As of 10.51am, IHH Healthcare is trading at RM5.37, up seven sen or 1.32%. This gives the group a market capitalisation of RM47.1 billion. The stock has slid from its recent height of RM5.65 early last month.
