KUALA LUMPUR: IHH Healthcare Bhd’s resilience amidst the pandemic has kept it in analysts’ good graces as the group continues to beat expectations.

       IHH’s revenue for the first half of financial year 2021 (FY21) increased 34% while earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 107% year-on-year (y-o-y).

       Although the first half of FY20 was a low base due to major lockdowns in various markets where non-urgent treatments were postponed, CGS-CIMB Research noted that the first six months of 2021 has shown stronger patient volume and revenue intensity.

       “In addition, the magnitude of Covid-19 related services provided by IHH increased.

       “The stronger Ebitda growth (margin improved nine percentage points year-on-year or y-o-y to 25% in the first half of FY21) was driven by higher revenue and stringent cost control as well as operational efficiencies from higher patient volume,” it said.

       This, coupled with lower finance expenses and higher share of profits from joint ventures and associates, boosted core net profit by 660% y-o-y to RM779.4mil, which came in at 82% of CGS-CIMB’s and 77% of Bloomberg consensus full-year forecast.

       The brokerage acknowledged that it had underestimated the Ebitda for India and Singapore as well as overestimated its net finance cost.

       It reiterated its “add” rating on IHH at an unchanged target price of RM6.91, noting that the stock is trading at an attractive valuation of more than one standard deviation below its five-year historical mean.

       The research house continues to like IHH for its diversified geographical reach.

       RHB believes that patient flow moving into the second half of FY21 will continue to be supported by increased decanting activities from public hospitals, although margins are unlikely to be lucrative.

       “Although medical tourism remains curtailed in most places, revenue from Covid-19-related services should partially offset the drop in foreign patient volume, while the growing Covid-19 vaccination rates in all markets will help support occupancies in FY21, in our view.

       “Greater China remained the only market to report an Ebitda loss in the first half of FY21 but the losses narrowed from RM116mil in the first half of FY20 to just RM14mil in the first half of FY21,” it added.

       Elsewhere, MIDF Research and RHB Research have also maintained their “buy” recommendations on IHH with a target price of RM6.35 and RM6.80, respectively.

       RHB believes that patient flow moving into the second half of FY21 will continue to be supported by increased decanting activities from public hospitals, although margins are unlikely to be lucrative.

       IHH is also adopting, innovating and delivering digitalisation and technology to boost productivity.

       According to MIDF, the group is seeking to extract greater synergies by leveraging economies to achieve lower costs and better optimisation of resources.

       IHH has identified three key drivers moving forward, which include unyielding focus on delivering excellent care for its clients, the ability to provide Covid-related services in terms of laboratory and diagnostics services, and consistent strong cost discipline.

       “IHH has proven to be resilient amidst the uncertainty of the economic recovery and ongoing pandemic.

       “We maintain our optimistic view on IHH on the basis of a robust balance sheet, diversified business locations and strong synergies across its network of hospitals and medical institutions,” said MIDF.