PETALING JAYA: IHH Healthcare Bhd’s results for the financial year 2021 (FY21) came in stronger-than-expected and analysts expect its pace of recovery to pick up in the subsequent quarters.
The group’s diversified earnings base across 10 markets also provides resilience –something that differentiates the stock from other listed healthcare providers.
For FY21, net profit increased four-fold to RM1.86bil on the back of stronger earnings before interest, taxes, depreciation and amortisation (Ebitda), lower net finance costs and higher share of profits from associates.
According to RHB Research, the result was 105% of its full-year forecast and 103% of that of consensus.
It noted that Singapore operations performed better than expected, while its other markets are resilient.
“IHH’s recovery trajectory remains on track, complemented by its appetite to acquire strategic assets and develop its high-margin diagnostics business,” said the research firm in a report yesterday.
For the fourth quarter ended Dec 31, 2021 (Q4’21), net profit rose 8.16% to RM453.60mil following increased patient volumes. RHB said on a quarter-on quarter basis, Malaysia and the Turkey-based Acibadem segments posted stronger figures, while Gleaneagles Hong Kong had narrowed losses significantly for its Greater China segment.
It keeps a “buy” on the stock with a sum-of-part-derived target price of RM7.35, noting that the counter was trading at an undemanding 13 times FY’22 forecast enterprise value/Ebitda.
Meanwhile, CGS-CIMB Research, which continues to like the stock for its diversified geographical exposure, expected Covid-19 revenue contribution to likely decline in 2022.
This could be offset by the return of foreign patients and domestic demand.
Operating cost could also increase as operations normalise.
But the research firm added that as a diversified healthcare provider, IHH could see a lower impact from the decline in Covid-19 revenue versus its peers.
The potential reopening of international borders should also help to support better patient volumes going forward.
Upside include faster recovery from the pandemic, while downside risks include a steep weakening of the Turkish lira against ringgit and the impact of new tax rulings in Malaysia.
MIDF Research, in a post-results review, noted that IHH continued to adapt and reposition itself for long-term growth, plus have been investing in digital technology to ensure higher accessibility and affordability.
“With the recent investment of RM100mil in its four-year digital transformation plan, as well as the inclusion of high-end diagnostics as part of its new business segment, we believe IHH will remain buoyant in FY22 on the expectancy of higher revenue and profitability of its digital strategy,” said the research firm.