KUALA LUMPUR: AmInvestment Bank Research is positive over the renewal capex stemming from the agreement between Parkway Life REIT (PLife REIT) and IHH Healthcare Bhd in relation to three Singapore hospital properties.

       "While the master lease agreement was within expectation, we view the renewal capex works as a good opportunity for IHH to deepen the level of service it can offer to its patients, appealing to a wider range of both local and foreign customers.

       "We feel that it could provide IHH with better positioning in the competitive Singaporean market," it said in a note.

       It added that PLIfe REIT already has a foothold in Singapore and Japan, and plans to build into a third key market pose as potentially beneficial to IHH.

       The research house maintained its earnings forecasts pending further details on the specifics on the capex expansion works.

       It maintained its "hold" call on IHH Healthcare with a fair value of RM5.64 a share based on a discounted cash flow with a WACC of 7% and a terminal growth rate of 3.5%.

       Recently, the parties signed new master lease agreements pertaining to the hospitals for a term of 20.4 years from 2022 to 2042 with an option to renew for a further 10 years.

       There was also a deal for renewal capex works, which are expected to take about three years commencing Jan 1, 2023.

       Accordingly, PLife REIT will inject a one-time renewal capex of up to S$150mil to enhance overall performance, operations and architectural design of hospitals.

       The utilisation of available space and resources is expected to be improved.

       Thirdly, a right of refusal is to be granted over Mount Elizabeth Novena Hospital in the even of its disposal which serves to enhance the acquisition potential of PLife REIT.