Maybank IB says IHH Healthcare’s bed occupancy rate to improve

KUALA LUMPUR (May 27): IHH Healthcare Bhd’s bed occupancy rate (BOR) is expected to improve in the coming quarters in Malaysia and Singapore as deferred resume treatments and the Covid-19 Omicron situation subsides, said Maybank Investment Bank (Maybank IB).

The volume recovery, in his opinion, should be more than enough to offset the impact of normalizing revenue intensity and the reduction in Covid-19-related services.

“Besides, the group will continue to make appropriate price adjustments to reflect cost inflation pressures.

“As such, we maintain our ‘buy’ call on IHH with an unchanged target price (TP) of RM7.60 based on sum-of-parts (SOP) [valuation],” Maybank IB said in a research note on Friday (May 27).

It noted that key risks to its call include rising interest rates (as 82% of its total RM8.2 billion in borrowings are under floating rates), prolonged weakening of the Turkish lira (as it runs the Acibadem Healthcare Group in Turkey), and a slower than expected BOR recovery.

Meanwhile, Public Investment Bank believes that inflationary pressures could affect demand in the near term, while Covid-19-related services should be tapering off, given the easing infection rate.

However, it is optimistic that IHH’s long-term earnings trajectory remains intact, supported by the management’s proven track record in controlling costs as well as the return of foreign patients following the easing of travel restrictions.

“Long-term growth is further supported by megatrends such as the aging population as well as rising consumer affluence,” the investment bank said, maintaining its “outperform” rating of IHH, with a revised SOP TP of RM7.60.

Public Investment Bank also revised its earnings forecasts for IHH for the financial year ending Dec 31, 2022 (FY22) to FY24 upwards by 13% to 15% by assuming lower costs and higher revenue as it expects higher foreign patient volumes due to the reopening of international borders.

Kenanga Research, meanwhile, maintained its “market perform” call on IHH, with its SOP TP unchanged at RM6.65.

It noted that although IHH is optimistic about a rebound of its non-Covid-19 businesses going forward, some short-term headwinds such as the tapering of Covid-19-related revenues and inflationary pressures can be expected.

The research house said IHH had taken proactive initiatives to partially mitigate the effects of lower patient volumes by improving the case mix and by providing Covid-19 screening services.

“As borders reopen and restrictions lifted, the group is ramping up efforts to improve its core businesses by growing its domestic and foreign patient load back to pre-Covid-19 levels,” said Kenanga Research.

So read:
RHB Research raises target price for IHH Healthcare to RM7.60

IHH’s 1QFY22 net profit rose 31%, warns of headwinds from tapering of Covid-related revenue and rising costs

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