KUALA LUMPUR: IHH Healthcare Bhd’s (IHH) move to dispose of its entire stake in IMU Health Sdn Bhd (IMUH) is not expected to result in a significant dent in the group’s financial performance, according to MIDF Research.

       “As at FY21, the division only contributed to about 1% of the total revenue and 3% of the total profit, hence, we make no changes at this juncture to our earnings forecasts.

       “We are of the opinion that IHH is moving within our trajectory range,” the research house said.

       IHH is disposing of its entire stake in IMUH as well as a hospital under construction to two separate buyers for a total initial cash consideration of RM1.35bil, which is subject to adjustments.

       IHH has inked a conditional agreement to sell its entire 1.14 million shares in IMUH, which ultimately operates higher learning institutions, several clinics and a dialysis centre, to Inbound Education Holdings Sdn Bhd (IEHSB).

       In conjunction with the disposal, IMUH’s unit IMU Education Sdn Bhd will dispose of a hospital that is still being constructed in Kuala Lumpur, along with its assets and liabilities, to Columbia Asia Sdn Bhd.

       MIDF noted that while IHH does not foresee any major risk upon the transaction, the latter remains cautious on several scenarios, including the non-completion of the transaction due to failed approvals, implementation of equity guidelines by the Ministry of Health risking a delay in the agreement, contractual risks, and loss of income from IMUH.

       Upon completion, IMUH and its subsidiaries will cease to be under IHH and IHH will halt all consolidated results of IMUH.

       IHH also estimated a lower gearing from 0.21x (as of FY21) to 0.16x after the proposed transaction.

       “All in, we maintain our ‘buy’ call with an unchanged target price of RM7.96 per share on IHH,” MIDF said.

       It believes that the handsome gain from the divestment of IMUH to the consortium of investors will be advantageous to IHH in the long run, as it continues to concentrate on its hospitals, medical operations and equipment, research and diagnostics, and digital healthcare.

       “We continue to view IHH positively for its comprehensive expansion and growth plans, as well as a strong and focused balance sheet,” MIDF said.