PETALING JAYA: The lease extension of IHH Healthcare Bhd’s Singapore hospitals is expected to boost the group’s competitiveness in the market.

       AmInvestment Bank in a report yesterday said the lease renewal served as a good opportunity for IHH to deepen the level of service it could offer its patients, thus appealing to a wider range of both local and foreign customers.

       “We feel that it can provide IHH with better positioning in the competitive Singaporean market.

       “As of now, we are maintaining our earnings forecast, pending further details on the specifics of the capital expenditure (capex) expansion works,” the research house said.

       AmInvestment Bank is maintaining its “hold” call on IHH with a fair value of RM5.64 per share, based on a discounted cashflow with a weighted average cost of capital of 7% and a terminal growth rate of 3.5%.

       On Wednesday, IHH announced it would be extending the lease of three hospitals in Singapore owned by Parkway Life Real Estate Investment Trust (PLife REIT) for an additional 20 years.

       IHH said the lease terms for Mount Elizabeth Hospital Property, Gleneagles Hospital Property and Parkway East Hospital Property will end on Dec 31, 2042, following the extension that will be effective on Aug 23, 2022.

       There is also an option to renew for a further 10 years from Jan 1, 2043 to Dec 31, 2052.

       The extended leases would also cover medical centre units, retail units and car park lots, where applicable, for each hospital.

       IHH said the new master lease agreements provide business continuity and stability of operations for the group in Singapore and a sustained rental income stream for PLife REIT.

       The new master lease agreements will be entered into between HSBC Institutional Trust Services (Singapore) Ltd, as trustee of PLife REIT and master lessor, and Parkway Hospitals Singapore Pte Ltd, a wholly-owned subsidiary of Parkway Holdings Ltd.

       Parkway Holdings is an indirect wholly-owned subsidiary of IHH.

       AmInvestment Bank said PLife REIT will inject a one-time renewal capex of up to S$150mil (RM465mil) to enhance overall performance, operations and architectural design of the hospitals.

       “Utilisation of available space and resources is expected to be improved,” it said.

       IHH also announced that the right of first refusal (ROFR) would be granted by a wholly-owned subsidiary of Parkway Holdings to the trustee of PLife REIT over the hospital block of the Mount Elizabeth Novena Hospital development in the event of disposal of the hospital.

       AmInvestment Bank said the ROFR served to enhance the acquisition potential of PLife REIT.