UOBKayhian on 27 Aug 2015
FY15F PE (x): 47.6
FY16F PE (x): 38.2
2Q15 net profits were within our expectations, representing 23% of our full-year
estimates. Inpatient admissions update. In Singapore, the 5.5% yoy inpatient increase
was attributed mainly to local patients as well as medical travellers from non-traditional
markets such as the Middle East. In Turkey, inpatient admissions declined by 1.1% yoy
to 32,636 due to the start of the Ramadan period in mid-Jun 15 as compared with the
start of Ramadan period at end-June in 2014. In Malaysia, hospitals saw a marginal
0.5% yoy decrease in inpatient admissions mainly due to a general slowdown in
consumption following the implementation of GST in Apr 15.
Upgrade to HOLD but maintain target price at S$1.77. We note that post a 15.6%
decline in share price from its high in May 15, IHH is currently trading at 38.2x 2016F
PE, slightly higher than the industry’s 31.5x but at a cheaper valuation based on its
2016F PEG ratio of 1.56x vs peers’ 2.2x.
Showing posts with label IHH. Show all posts
Showing posts with label IHH. Show all posts
Monday, 31 August 2015
Thursday, 25 June 2015
Healthcare Sector
OCBC on 22 June 2015
While our local bourse has been rather lacklustre, the healthcare sector has been largely rewarding as the FTSE ST Health Care Index (FSTHC) has delivered a 36% gain YTD compared to -2.1% by the STI benchmark. However, broad-based valuations currently seem stretched, as the index is trading above 1 s.d. of its two-year historical forward P/E average with a six-year historical high forward P/E of 26.5x. We keep our NEUTRAL stance on the sector as we think such premium valuations are warranted only to a certain extent, while a deeper look into specific companies suggest growth stories may already be priced in and a potential correction could be due. An overview of the subsectors, namely hospital players as well as healthcare equipment manufacturers, suggests that 1) higher expenses and near term margin pressure may be incurred in the near term during gestation stage, and 2) expectations could be running ahead of fundamentals.
Rewarding sector but valuations seem stretched
While our local bourse has been rather lacklustre, the healthcare sector paints a starkly different picture as the FTSE ST Health Care Index (FSTHC) has delivered a 36% gain YTD compared to -2.1% by the STI benchmark. The often-quoted supportive long-term outlook for healthcare plays amid uncertain times has made them a comparably rewarding haven for investors. However, we note that broad-based valuations currently seem stretched as the index is trading above 1 s.d. of its two-year historical forward P/E average with a six-year historical high forward P/E of 26.5x. We keep our NEUTRAL stance on the sector as we think such premium valuations are warranted only to a certain extent, while a deeper look into specific companies suggest growth stories may already be priced in and a potential correction could be due.
Clear growth story for hospital players but margin pressure in near-term
We had previously covered several healthcare companies’ plans to expand in China given the attractive growth prospects, but also highlighted operational risks and early stage of plans as caveats for a more optimistic stance. Under our coverage, share price for Raffles Medical Group [HOLD, $4.17] has had a largely sustained run-up since its confirmation on a Shanghai Hospital, which is slated for completion by mid-18. While this is a positive development, in the meantime, its 1Q15 results showed that higher expenses such as staff costs would likely be incurred due to other upcoming projects (Holland Village project to be ready by 1Q16 and Raffles Hospital extension by 1Q17). Peers such as IHH Healthcare Berhad [non-rated] could also face similar near-term pressures on operating margins due to on-going expansion plans in Malaysia and Turkey. With both stocks trading at more than 1 s.d. above their two-year historical forward P/E average, current valuations are becoming less attractive.
Are expectations running too fast?
We reiterate that a fundamental growth story would take time to materialise for Biosensors International Group [SELL, $0.60]. In addition, Boston Scientific’s Synergy stent may also take the lead, as it could be the first resorbable stent to receive FDA approval by end-15. The recent MERS outbreak in South Korea and depreciation of MYR against the USD have also led attention to healthcare suppliers, as Riverstone, UG Healthcare (UGHC) and Medtecs International [non-rated] have seen their share price rise to new levels, gaining 65%, 31%, 23% YTD respectively. We think the above factors are temporary while the companies’ own growth story may be priced in. As such, there could be some potential selloff ahead as peers like Hartalega have showed a hint of price correction.
While our local bourse has been rather lacklustre, the healthcare sector paints a starkly different picture as the FTSE ST Health Care Index (FSTHC) has delivered a 36% gain YTD compared to -2.1% by the STI benchmark. The often-quoted supportive long-term outlook for healthcare plays amid uncertain times has made them a comparably rewarding haven for investors. However, we note that broad-based valuations currently seem stretched as the index is trading above 1 s.d. of its two-year historical forward P/E average with a six-year historical high forward P/E of 26.5x. We keep our NEUTRAL stance on the sector as we think such premium valuations are warranted only to a certain extent, while a deeper look into specific companies suggest growth stories may already be priced in and a potential correction could be due.
Clear growth story for hospital players but margin pressure in near-term
We had previously covered several healthcare companies’ plans to expand in China given the attractive growth prospects, but also highlighted operational risks and early stage of plans as caveats for a more optimistic stance. Under our coverage, share price for Raffles Medical Group [HOLD, $4.17] has had a largely sustained run-up since its confirmation on a Shanghai Hospital, which is slated for completion by mid-18. While this is a positive development, in the meantime, its 1Q15 results showed that higher expenses such as staff costs would likely be incurred due to other upcoming projects (Holland Village project to be ready by 1Q16 and Raffles Hospital extension by 1Q17). Peers such as IHH Healthcare Berhad [non-rated] could also face similar near-term pressures on operating margins due to on-going expansion plans in Malaysia and Turkey. With both stocks trading at more than 1 s.d. above their two-year historical forward P/E average, current valuations are becoming less attractive.
Are expectations running too fast?
We reiterate that a fundamental growth story would take time to materialise for Biosensors International Group [SELL, $0.60]. In addition, Boston Scientific’s Synergy stent may also take the lead, as it could be the first resorbable stent to receive FDA approval by end-15. The recent MERS outbreak in South Korea and depreciation of MYR against the USD have also led attention to healthcare suppliers, as Riverstone, UG Healthcare (UGHC) and Medtecs International [non-rated] have seen their share price rise to new levels, gaining 65%, 31%, 23% YTD respectively. We think the above factors are temporary while the companies’ own growth story may be priced in. As such, there could be some potential selloff ahead as peers like Hartalega have showed a hint of price correction.
Friday, 29 May 2015
IHH Healthcare
UOBKayhian on 29 May 2015
FY15F PE (x): 48.2
FY16F PE (x): 38.8
IHH Healthcare’s (IHH) 1Q15 net profit below our and consensus full-year estimates by 23% and 9% respectively on the back of lower-than-expected inpatient volume growth at Parkway Pantai Life (PPL) Malaysia and the Acibadem business. Revenue and adjusted net profit increased 14% and 8% yoy respectively, driven mainly by growth in inpatient volume and revenue intensity. The group continues to ramp up operations in its relatively newer hospitals - Mount Elizabeth Novena Hospital, Acibadem Ankara Hospital and Acibadem Bodrum Hospital. Lower-than-expected inpatient volume growth. Our previous 2015 inpatient volume growth estimates for Parkway Pantai Life (PPL) Singapore, PPL Malaysia and Acibadem was 9.5%, 21.9% and 10.9% yoy respectively. Typically, growth in inpatient volumes are stronger in the second and third quarter of the year due to seasonality where inpatient and outpatient volumes are generally lower during festive periods and summer months. However, with inpatient growth for PPL Malaysia and Acibadem slowing down yoy in 1Q15, we have lowered our estimates to 16.2% and 9.2% respectively. Our inpatient volume growth assumption for PPL Singapore remains unchanged. Currently, one-third of IHH’s patients are foreigners while local patients make up two-thirds. In addition, we expect the increase in Middle Eastern patients to offset fluctuations from Indonesia. Maintain SELL with a lower target price of S$1.77 (from $S1.80). We think valuations are stretched and relatively unattractive at 48.2x 2015F PE vs peers’ average of 30.6x. Within the Singapore-listed healthcare space, we continue to prefer Raffles Medical and QT Vascular, the latter for those with a more aggressive risk appetite.
FY15F PE (x): 48.2
FY16F PE (x): 38.8
IHH Healthcare’s (IHH) 1Q15 net profit below our and consensus full-year estimates by 23% and 9% respectively on the back of lower-than-expected inpatient volume growth at Parkway Pantai Life (PPL) Malaysia and the Acibadem business. Revenue and adjusted net profit increased 14% and 8% yoy respectively, driven mainly by growth in inpatient volume and revenue intensity. The group continues to ramp up operations in its relatively newer hospitals - Mount Elizabeth Novena Hospital, Acibadem Ankara Hospital and Acibadem Bodrum Hospital. Lower-than-expected inpatient volume growth. Our previous 2015 inpatient volume growth estimates for Parkway Pantai Life (PPL) Singapore, PPL Malaysia and Acibadem was 9.5%, 21.9% and 10.9% yoy respectively. Typically, growth in inpatient volumes are stronger in the second and third quarter of the year due to seasonality where inpatient and outpatient volumes are generally lower during festive periods and summer months. However, with inpatient growth for PPL Malaysia and Acibadem slowing down yoy in 1Q15, we have lowered our estimates to 16.2% and 9.2% respectively. Our inpatient volume growth assumption for PPL Singapore remains unchanged. Currently, one-third of IHH’s patients are foreigners while local patients make up two-thirds. In addition, we expect the increase in Middle Eastern patients to offset fluctuations from Indonesia. Maintain SELL with a lower target price of S$1.77 (from $S1.80). We think valuations are stretched and relatively unattractive at 48.2x 2015F PE vs peers’ average of 30.6x. Within the Singapore-listed healthcare space, we continue to prefer Raffles Medical and QT Vascular, the latter for those with a more aggressive risk appetite.
Thursday, 19 March 2015
Healthcare Sector
OCBC on 18 Mar 2015
Following the recent earnings season, we saw steadier earnings from healthcare providers such as Raffles Medical Group (RFMD) and IHH Healthcare Berhad (IHH) [NON-RATED], as compared to a poor showing of results from Biosensors International Group (BIG). On a broad-based view, The FTSE ST Health Care Index (FSTHC) has been performing better than the FSSTI with an 8.1% YTD gain as compared to FSSTI’s marginal 0.02% YTD gain. However, FSTHC has been trading above its two-year historical average over the past six months, and valuations do not seem sufficiently attractive. Moreover, while favourable demographics will lead to increase in demand for the long-term, the government is also expanding the public healthcare infrastructure to address capacity pressures. Thus, with on-going expansion from private sector players as well, competition in the sector is likely to remain strong. Hence we maintain our NEUTRAL stance on the sector. Within our coverage, we have a HOLD rating on RFMD with S$3.91 fair value estimate, and a SELL rating on BIG with a fair value estimate of S$0.60.
Mixed share price performance within OIR coverage
The FTSE ST Health Care Index (FSTHC) has been trading above its two-year historical average over the past six months, and valuations on a broad-based level do not seem sufficiently attractive. Nonetheless, FTSHC has been performing better than the FSSTI with an 8.1% YTD gain as compared to FSSTI’s marginal 0.02% YTD gain. Within our coverage, we see a mixed showing in share price performance between Biosensors International Group (BIG) and Raffles Medical Group (RFMD). BIG’s price recovery earlier in the year was believed to be mainly supported by share buybacks as it gained 18.8% YTD, while RFMD’s price movement has been largely muted.
Steadier earnings from healthcare providers
RFMD recorded decent FY14 results as revenue rose 9.9% to S$374.6m and core earnings was up by an estimated 6.7% to S$64.6m, driven by growth in both its hospital services and healthcare services segments. Looking at its peer, IHH Healthcare Berhad’s (IHH) [NON-RATED] FY14 revenue grew 9% to RM7.3b and core PATMI increased 29% to RM785m, backed by the continued ramp up of Mount Elizabeth Novena Hospital in Singapore and higher revenue intensity cases. On the other hand, BIG’s 3QFY15 earnings remained under pressure as revenue fell 6.1% YoY to US$77.5m and PATMI dipped 33.2% YoY to US$7.4m, partly due to currency depreciation.
Strong competition in sector for the long-term
The long-term outlook remains favourable for Singapore’s healthcare sector, due to supportive demographics like an ageing population as well as factors including higher insurance coverage. We continue to see substantial funding from the local government towards infrastructure development to address capacity pressures while assuring affordability of healthcare services through increased subsidies for Singaporeans. However, the on-going expansion plans by both the public and private sector would likely translate to strong competition for the long-term. Nonetheless, we keep in mind that the private sector is also supported by foreign patients demand, and companies are expanding their presence overseas to potentially drive business growth.
Maintain NEUTRAL
We maintain our NEUTRAL stance on the healthcare sector as valuations are not sufficiently attractive and we expect competition in the sector to remain strong. Under our healthcare sector coverage, we have a HOLD rating on RFMD with S$3.91 fair value estimate as a lack of near term catalysts puts a cap on upside potential, though the counter has positive long-term growth prospects. While BIG [SELL, S$0.60] showed an inkling of improvement in its 3QFY15 operating margin, we look to see if the cost reduction initiatives taken are sustainable, and we await further progress in approvals for its medical devices.
The FTSE ST Health Care Index (FSTHC) has been trading above its two-year historical average over the past six months, and valuations on a broad-based level do not seem sufficiently attractive. Nonetheless, FTSHC has been performing better than the FSSTI with an 8.1% YTD gain as compared to FSSTI’s marginal 0.02% YTD gain. Within our coverage, we see a mixed showing in share price performance between Biosensors International Group (BIG) and Raffles Medical Group (RFMD). BIG’s price recovery earlier in the year was believed to be mainly supported by share buybacks as it gained 18.8% YTD, while RFMD’s price movement has been largely muted.
Steadier earnings from healthcare providers
RFMD recorded decent FY14 results as revenue rose 9.9% to S$374.6m and core earnings was up by an estimated 6.7% to S$64.6m, driven by growth in both its hospital services and healthcare services segments. Looking at its peer, IHH Healthcare Berhad’s (IHH) [NON-RATED] FY14 revenue grew 9% to RM7.3b and core PATMI increased 29% to RM785m, backed by the continued ramp up of Mount Elizabeth Novena Hospital in Singapore and higher revenue intensity cases. On the other hand, BIG’s 3QFY15 earnings remained under pressure as revenue fell 6.1% YoY to US$77.5m and PATMI dipped 33.2% YoY to US$7.4m, partly due to currency depreciation.
Strong competition in sector for the long-term
The long-term outlook remains favourable for Singapore’s healthcare sector, due to supportive demographics like an ageing population as well as factors including higher insurance coverage. We continue to see substantial funding from the local government towards infrastructure development to address capacity pressures while assuring affordability of healthcare services through increased subsidies for Singaporeans. However, the on-going expansion plans by both the public and private sector would likely translate to strong competition for the long-term. Nonetheless, we keep in mind that the private sector is also supported by foreign patients demand, and companies are expanding their presence overseas to potentially drive business growth.
Maintain NEUTRAL
We maintain our NEUTRAL stance on the healthcare sector as valuations are not sufficiently attractive and we expect competition in the sector to remain strong. Under our healthcare sector coverage, we have a HOLD rating on RFMD with S$3.91 fair value estimate as a lack of near term catalysts puts a cap on upside potential, though the counter has positive long-term growth prospects. While BIG [SELL, S$0.60] showed an inkling of improvement in its 3QFY15 operating margin, we look to see if the cost reduction initiatives taken are sustainable, and we await further progress in approvals for its medical devices.
Wednesday, 26 November 2014
IHH Healthcare
UOBKayhian on 26 Nov 2014
FY14F PE (x): 52.8.
FY15F PE (x): 40.9
Results broadly in line. 9M14 adjusted net profit of Rm540.8m accounts for 71.8% of our
full-year earnings estimates. The 23% yoy increase was on the back of higher inpatient
volumes and average revenue intensity from existing and new hospital contributions.
Hospital expansions to drive organic growth. About 3,000 new beds will be added
progressively to IHH’s current 6,000-bed portfolio through several expansions, as well as
brownfield and greenfield projects. The average daily census (ADC) for Mount Elizabeth
Novena Hospital (MENH) of 180 for 3Q14 was higher than its average of 90. This
increase in average number of patients in the facility per day also implies that
utilisation for MENH is picking up.
Expect greater cost pressure. Wages are expected to continue increasing in Malaysia
and Singapore after staff cost rose by 13% on average in 3Q14. Management has
guided that after excluding extra staff cost incurred for expansions, a like for like
comparison would be around 8-9% compared with last year’s 6%. The increase is driven
mainly by higher nurse salaries and the restriction of foreign workers. Although the price
adjustments did not fully factor in the wage cost pressures, the group still managed to
increase savings on consumables which exceeded expectations by 30% ytd on the back
of efficient sourcing and procurement. In lieu of the rising cost pressure and an Apr 15
GST hike in Malaysia, the group has indicated its intention to raise prices in multiple
stages next year.
Maintain SELL at a target price of S$1.60. We continue to think valuations are
overpriced with the stock currently trading at a 2015F PE of 41x vs the peer average of
29x. Within the Singapore-listed healthcare space, we prefer Raffles Medical and QT
Vascular, for those with a more aggressive risk appetite.
FY14F PE (x): 52.8.
FY15F PE (x): 40.9
Results broadly in line. 9M14 adjusted net profit of Rm540.8m accounts for 71.8% of our
full-year earnings estimates. The 23% yoy increase was on the back of higher inpatient
volumes and average revenue intensity from existing and new hospital contributions.
Hospital expansions to drive organic growth. About 3,000 new beds will be added
progressively to IHH’s current 6,000-bed portfolio through several expansions, as well as
brownfield and greenfield projects. The average daily census (ADC) for Mount Elizabeth
Novena Hospital (MENH) of 180 for 3Q14 was higher than its average of 90. This
increase in average number of patients in the facility per day also implies that
utilisation for MENH is picking up.
Expect greater cost pressure. Wages are expected to continue increasing in Malaysia
and Singapore after staff cost rose by 13% on average in 3Q14. Management has
guided that after excluding extra staff cost incurred for expansions, a like for like
comparison would be around 8-9% compared with last year’s 6%. The increase is driven
mainly by higher nurse salaries and the restriction of foreign workers. Although the price
adjustments did not fully factor in the wage cost pressures, the group still managed to
increase savings on consumables which exceeded expectations by 30% ytd on the back
of efficient sourcing and procurement. In lieu of the rising cost pressure and an Apr 15
GST hike in Malaysia, the group has indicated its intention to raise prices in multiple
stages next year.
Maintain SELL at a target price of S$1.60. We continue to think valuations are
overpriced with the stock currently trading at a 2015F PE of 41x vs the peer average of
29x. Within the Singapore-listed healthcare space, we prefer Raffles Medical and QT
Vascular, for those with a more aggressive risk appetite.
Thursday, 9 October 2014
Healthcare Sector
OCBC on 16 Sep 2014
SGX-listed healthcare companies which we track have largely reported improved financial performance during the recent 2QCY14 results season. Under our coverage, Raffles Medical Group’s (RMG) earnings met our expectations but Biosensors International Group fell short. Looking ahead, we believe secular trends such as an aging population and better health awareness will underpin demand for higher quality healthcare services and products. Healthcare companies have thus continued their expansion plans to leverage on this positive long-term outlook. Notwithstanding the robust secular fundamentals, we believe near-term risks exist. The FTSE ST Health Care Index is now trading at a blended forward PER of 21.9x, which is close to 1.3 standard deviations above its mean 5-year forward PER. We believe valuations are now rich. Hence, downgrade the healthcare sector to NEUTRAL. Our preferred pick within the sector is still RMG [HOLD; FV: S$3.90], but we believe a better entry point for the stock would be below S$3.60.
Growth largely intact
SGX-listed healthcare companies which we track have largely reported improved financial performance during the recent 2QCY14 results season (refer to Exhibit 1). Under our coverage, Raffles Medical Group’s (RMG) 8.5% YoY growth in its 2Q14 PATMI to S$15.6m met our expectations. On the contrary, Biosensors International Group continued its lacklustre earnings trend, posting a 18.4% YoY dip in its 1QFY15 core PATMI to US$9.9m. This was its weakest performance since 4QFY10 and was also below our expectations. Other notable performers include IHH Healthcare Berhad [NON-RATED] and Q&M Dental [NON-RATED]. The former saw a 20.2% YoY jump in its 2Q14 core earnings to MYR191.8m, driven by a broad-based increase in its inpatient admission volumes across its core markets (Singapore, Malaysia and Turkey). Q&M Dental’s 33.0% YoY increase in its PATMI to S$1.2m was contributed by its strong revenue growth of 27.3%.
Secular trends still positive
Looking ahead, we believe secular trends such as an aging population and better health awareness will underpin demand for higher quality healthcare services and products. According to independent research firm Business Monitor International, Singapore’s health spending is forecasted to grow at a CAGR of 8.8% from S$17.8b in 2013 to S$32.0b in 2020. Meanwhile, health spending per capita is projected to increase at a 4.3% CAGR from S$2,918 to S$3,926 during the same period. Healthcare companies have thus continued their expansion plans to leverage on this positive long-term outlook. IHH announced on 12 Sep 2014 that it had entered into a Sale and Purchase Agreement to acquire a 100% equity stake in Radlink-Asia from Fortis Healthcare Singapore for a sum of S$137m. Radlink-Asia is involved in the provision of outpatient diagnostic and molecular imaging services in Singapore. China’s recent decision to allow full foreign ownership of hospitals in seven cities would benefit RMG’s plans to expand further in China. Notwithstanding the robust secular fundamentals, we believe near-term risks to the sector include an outbreak of the Ebola pandemic, softening medical tourism receipts given the strong Singapore dollar and weaker economic growth in the region.
Downgrade sector to NEUTRAL
Majority of the stocks within the healthcare sector have performed well YTD. The FTSE ST Health Care Index (FSTHC) is now trading at a blended forward PER of 21.9x, which is close to 1.3 standard deviations above its mean 5-year forward PER. The FSTHC is also trading at a 58% premium over the STI’s blended forward PER, as compared to the average 28% premium over the past five years. In light of the rich valuations, we downgrade the healthcare sector to NEUTRAL. Our preferred pick within the sector is still RMG [HOLD; FV: S$3.90], but we believe a better entry point for the stock would be below S$3.60.
SGX-listed healthcare companies which we track have largely reported improved financial performance during the recent 2QCY14 results season (refer to Exhibit 1). Under our coverage, Raffles Medical Group’s (RMG) 8.5% YoY growth in its 2Q14 PATMI to S$15.6m met our expectations. On the contrary, Biosensors International Group continued its lacklustre earnings trend, posting a 18.4% YoY dip in its 1QFY15 core PATMI to US$9.9m. This was its weakest performance since 4QFY10 and was also below our expectations. Other notable performers include IHH Healthcare Berhad [NON-RATED] and Q&M Dental [NON-RATED]. The former saw a 20.2% YoY jump in its 2Q14 core earnings to MYR191.8m, driven by a broad-based increase in its inpatient admission volumes across its core markets (Singapore, Malaysia and Turkey). Q&M Dental’s 33.0% YoY increase in its PATMI to S$1.2m was contributed by its strong revenue growth of 27.3%.
Secular trends still positive
Looking ahead, we believe secular trends such as an aging population and better health awareness will underpin demand for higher quality healthcare services and products. According to independent research firm Business Monitor International, Singapore’s health spending is forecasted to grow at a CAGR of 8.8% from S$17.8b in 2013 to S$32.0b in 2020. Meanwhile, health spending per capita is projected to increase at a 4.3% CAGR from S$2,918 to S$3,926 during the same period. Healthcare companies have thus continued their expansion plans to leverage on this positive long-term outlook. IHH announced on 12 Sep 2014 that it had entered into a Sale and Purchase Agreement to acquire a 100% equity stake in Radlink-Asia from Fortis Healthcare Singapore for a sum of S$137m. Radlink-Asia is involved in the provision of outpatient diagnostic and molecular imaging services in Singapore. China’s recent decision to allow full foreign ownership of hospitals in seven cities would benefit RMG’s plans to expand further in China. Notwithstanding the robust secular fundamentals, we believe near-term risks to the sector include an outbreak of the Ebola pandemic, softening medical tourism receipts given the strong Singapore dollar and weaker economic growth in the region.
Downgrade sector to NEUTRAL
Majority of the stocks within the healthcare sector have performed well YTD. The FTSE ST Health Care Index (FSTHC) is now trading at a blended forward PER of 21.9x, which is close to 1.3 standard deviations above its mean 5-year forward PER. The FSTHC is also trading at a 58% premium over the STI’s blended forward PER, as compared to the average 28% premium over the past five years. In light of the rich valuations, we downgrade the healthcare sector to NEUTRAL. Our preferred pick within the sector is still RMG [HOLD; FV: S$3.90], but we believe a better entry point for the stock would be below S$3.60.
Friday, 29 August 2014
IHH Healthcare
UOBKayhian on 29 Aug 2014
FY14F PE (x): 52.6
FY15F PE (x): 40.7
Results in line. IHH Healthcare (IHH) reported strong performance at its existing
hospitals and the continuous ramp-up of new hospitals. Parkway Pantai, Acibadem and
IMU Health reported 2Q14 revenue growth of 12% yoy each on a constant currency
basis, and EBITDA growth of 18%, 13% and 17% respectively. 1H14 revenue and net
profit represent 47-48% of our full-year forecasts.
Valuations lofty; downgrade to SELL. We have a higher target price of S$1.60 after we
adjusted for a higher peer-average EV/EBITDA multiple. Nonetheless, we think
valuations are rich with the stock currently trading at a 2015F PE of 41x vs the peer
average of 25x. Within the Singapore-listed healthcare space, we prefer Raffles
Medical and QT Vascular for those with a more aggressive risk appetite.
FY14F PE (x): 52.6
FY15F PE (x): 40.7
Results in line. IHH Healthcare (IHH) reported strong performance at its existing
hospitals and the continuous ramp-up of new hospitals. Parkway Pantai, Acibadem and
IMU Health reported 2Q14 revenue growth of 12% yoy each on a constant currency
basis, and EBITDA growth of 18%, 13% and 17% respectively. 1H14 revenue and net
profit represent 47-48% of our full-year forecasts.
Valuations lofty; downgrade to SELL. We have a higher target price of S$1.60 after we
adjusted for a higher peer-average EV/EBITDA multiple. Nonetheless, we think
valuations are rich with the stock currently trading at a 2015F PE of 41x vs the peer
average of 25x. Within the Singapore-listed healthcare space, we prefer Raffles
Medical and QT Vascular for those with a more aggressive risk appetite.
Monday, 2 June 2014
IHH Healthcare
UOBKayhian on 2 June 2014
FY14F PE (x): 44.6
FY15F PE (x): 34.6
Robust 1Q14 driven by strong demand, more complex medical cases and price
adjustments. A high-growth engine in the near term on the back of a 3,000-bed
expansion capex. Potential for further margin improvement as operating leverage kicks
in. Share price will be well supported but valuations are rich. Maintain HOLD and target
price of S$1.38. Entry price: S$1.25.
Robust growth in inpatient admissions due to strong demand across Singapore,
Malaysia and Turkey. In Singapore (+6.4% yoy), the increase was attributed to local
patients as well as medical travellers from non-traditional markets such as the Middle
East, where IHH expanded their corporate partnerships. Malaysia (+9.3%) enjoyed
strong inflows from the domestic and Indonesian market. Turkey (+5.9%) grew on
strong performance at its existing hospitals and contributions from recently-opened
facilities. Higher revenue intensity on increased complexity of medical cases and price
adjustments to combat cost inflation. In Singapore (+7.6% yoy) and Malaysia (+8.5%),
average revenue per inpatient reached RM23,187 and RM4,757 in 1Q14 respectively.
Acibadem (+8.2%) achieved an average revenue per inpatient of RM9,166 despite a
typically weak winter period.
Share price well supported but valuations are rich; maintain HOLD and target price of
S$1.38 based on our SOTP model. IHH is currently trading at 35x 2015F PE, above the
industry average of 23x. Our target price implies 29x 2015F PE. Within the Singaporelisted
healthcare space, we prefer Raffles Medical and QT Vascular for those with a
more aggressive risk appetite.
FY14F PE (x): 44.6
FY15F PE (x): 34.6
Robust 1Q14 driven by strong demand, more complex medical cases and price
adjustments. A high-growth engine in the near term on the back of a 3,000-bed
expansion capex. Potential for further margin improvement as operating leverage kicks
in. Share price will be well supported but valuations are rich. Maintain HOLD and target
price of S$1.38. Entry price: S$1.25.
Robust growth in inpatient admissions due to strong demand across Singapore,
Malaysia and Turkey. In Singapore (+6.4% yoy), the increase was attributed to local
patients as well as medical travellers from non-traditional markets such as the Middle
East, where IHH expanded their corporate partnerships. Malaysia (+9.3%) enjoyed
strong inflows from the domestic and Indonesian market. Turkey (+5.9%) grew on
strong performance at its existing hospitals and contributions from recently-opened
facilities. Higher revenue intensity on increased complexity of medical cases and price
adjustments to combat cost inflation. In Singapore (+7.6% yoy) and Malaysia (+8.5%),
average revenue per inpatient reached RM23,187 and RM4,757 in 1Q14 respectively.
Acibadem (+8.2%) achieved an average revenue per inpatient of RM9,166 despite a
typically weak winter period.
Share price well supported but valuations are rich; maintain HOLD and target price of
S$1.38 based on our SOTP model. IHH is currently trading at 35x 2015F PE, above the
industry average of 23x. Our target price implies 29x 2015F PE. Within the Singaporelisted
healthcare space, we prefer Raffles Medical and QT Vascular for those with a
more aggressive risk appetite.
Wednesday, 5 March 2014
IHH Healthcare
UOBKayhian on 5 Mar 2014
FY14F PE (x): 40.4
FY15F PE (x): 31.3
Still a high-growth engine in the near term as the group pushes on with its aggressive
expansion strategy. IHH will be adding close to 3,000 new beds from 2014-16 as part of
its RM3.4b capex plan, with a few more potential brownfield and greenfield projects
under evaluation. This will drive our projected 3-year revenue and earnings CAGR for
2013-16F of 17% and 27% respectively. Upgrade to HOLD with a revised target price of
S$1.38, based on our SOTP model. IHH is currently trading at 31x 2015F PE, in line
with peers’ average. Our target price implies 29x 2015F PE. Entry price is S$1.25.
FY14F PE (x): 40.4
FY15F PE (x): 31.3
Still a high-growth engine in the near term as the group pushes on with its aggressive
expansion strategy. IHH will be adding close to 3,000 new beds from 2014-16 as part of
its RM3.4b capex plan, with a few more potential brownfield and greenfield projects
under evaluation. This will drive our projected 3-year revenue and earnings CAGR for
2013-16F of 17% and 27% respectively. Upgrade to HOLD with a revised target price of
S$1.38, based on our SOTP model. IHH is currently trading at 31x 2015F PE, in line
with peers’ average. Our target price implies 29x 2015F PE. Entry price is S$1.25.
Friday, 21 February 2014
IHH Healthcare
AmFraser Research, Feb 19
WE reaffirm our "hold" recommendation on IHH Healthcare with a lower sum of parts-based fair value of RM3.60 (about S$1.38)/share (against RM3.90/share previously). Our revised fair value follows the adjustment to our Ebitda to reflect: (1) slower ramp-up at Mount Novena Elizabeth; (2) foreign exchange rate assumption; and (3) full consolidation of Parkway Life Reit (36 per cent-owned) as a subsidiary.
While we like IHH's strong branding and good prospect, its valuation of 37 times forecast PE for FY2014 is lofty when compared to regional peers' 30 times, in our view. Going forward, expansion will mainly be in Malaysia and Turkey. As for Singapore, there is no further expansion besides the ramp-up of bed capacities.
HOLD
Thursday, 28 November 2013
IHH Healthcare
CIMB Research, Nov 26
IHH's Q3 earnings offered no surprises, despite seasonal effects. The good news is the growth story at its new hospitals, while the bad news is confirmation of our view that rate charges at Singapore's hospitals have peaked. Its valuation remains the only ugly facet of this story.
Q3-13 and 9M-13 core earnings were in line, accounting for 21 per cent and 78 per cent, respectively of our FY13 numbers.
We make no changes to our forecasts and our SOP (sum of parts) based target price stays. While we like the IHH franchise, we struggle to find any near-term catalysts.
As we expect better earnings only in FY15-16, the current valuation is decidedly unexciting.
Q3FY13's core net profit was driven by growth at its new hospitals and savings in finance costs despite seasonal effects.
The better numbers were offset by depreciation and finance costs relating to new hospitals that had to be recognised in the P&L after completion. The good news is that Acibadem Bodrum has achieved Ebitda breakeven.
Last week, we mentioned there was a bigger issue with peaking charges and revenue intensity in Singapore, rather than the decline in Indonesian patients. Indeed, such patient admissions jumped by 9 per cent y-o-y in Q3FY13, allaying fears of a weaker rupiah.
The average revenue per inpatient in Singapore grew by only one per cent from Q2FY13, despite favouring S$-to-RM translation.
The balance sheet is still healthy given its savvy cashflow management and structured capex programme. Our main gripe is the uncertainties in FX translational differences in the income statement and balance sheet, which further blurred any meaningful comparisons across its markets.
Although IHH should continue to benefit from growing private healthcare consumption and revenue intensity in all its three markets, improving entry points and fundamentals for its regional peers may provide investors with better short- to mid-term returns. we keep IHH at Neutral, with a TP of $1.72.
NEUTRAL
Friday, 30 August 2013
Healthcare Sector
Maybank Kim Eng Research, Aug 29
PRIME Minister Lee Hsien Loong's healthcare measures in his recent National Day Rally speech are supportive of our positive view on the private healthcare sector. While the primary aim is to tackle ongoing concerns of Singaporeans about the affordability of healthcare, the other underlying trend is that the private healthcare sector will play an increasingly significant role, in our view. In particular, we see two key changes which will benefit providers:
Medisave
Key change: To extend Medisave usage for outpatient treatments.
Impact: Medisave is a compulsory national saving scheme which puts aside 7 to 9.5 per cent of Singaporeans' income for medical requirements. For hospital services, this was previously restricted to inpatient costs and very limited outpatient treatments. This change would benefit private hospitals as Medisave claims can now support patients for outpatient treatments, which in itself is a growing trend.
Community Healthcare Assist Scheme (CHAS)
Key change: Removal of minimum age limit of 40.
Impact: CHAS is a scheme which subsidises lower-income Singaporeans seeking treatment at private clinics, which would otherwise be more expensive than the crowded public clinics. We estimate this change would double the number of eligible participants from 0.7 million currently to around 1.5 million. This will drive traffic towards private clinics.
Raffles Medical Group and IHH Healthcare are the winners. The increased ability of patients to pay for healthcare services will benefit Raffles Medical and IHH, the largest private healthcare providers in Singapore.
Other than hospitals, they are also expected to benefit from the CHAS reform stated above with their extensive clinic networks in Singapore, which contribute around 35 and 10 per cent of their revenues respectively.
We are neutral on the Singapore healthcare sector, with positive industry dynamics weighed against possible short-term demand dampening from the currency uncertainty in the region.
Singdollar strength is a negative, given that foreign patients, mostly from the region, make up 30 to 50 per cent of hospitals' load.
Raffles Medical is our top "buy" due to its long-term earnings resiliency; its hospital expansion plans, which will drive earnings growth and valuations, are lower than its peers. We have a "hold" call on IHH as we are cognisant of the execution risk from a very ambitious international expansion plan and the currently steep valuations.
Sector - NEUTRAL
Tuesday, 12 March 2013
Healthcare Sector
OCBC on 11 Mar 2013
The healthcare companies under our coverage reported a contrasting set of results during the recently concluded 4QCY12 results season. While Raffles Medical Group (RMG) delivered double-digit YoY revenue and core PATMI growth which were in line with our expectations, Biosensors International Group’s (BIG) results missed ours and the street’s estimates. However, this was due to weak licensing revenue from Japan. Its core drug-eluting stent (DES) business continued to perform well. Other healthcare companies, notably IHH and Q&M Dental, have also largely delivered growth in 4QCY12. We maintain our OVERWEIGHT rating on the healthcare sector as we are still positive on the growth trajectory of the industry. BIG [BUY; FV: S$1.63] remains our preferred pick within the sector. Despite its recent share price decline, which we attribute partly to market jittery over the uncertainty of its acquisition timeline, we are optimistic that management would be able to finalise earnings accretive acquisition(s) in the near future.
Mixed 4QCY12 results for companies under our coverage
The healthcare companies under our coverage reported a contrasting set of results during the recently concluded 4QCY12 results season. While Raffles Medical Group (RMG) delivered double-digit YoY revenue and core PATMI growth of 14.9% and 13.8% respectively, which were in line with our expectations, Biosensors International Group’s (BIG) results were disappointing and missed ours and the street’s estimates. Its topline fell 4.0% YoY due to weak licensing and royalties revenue, while core earnings dipped 9.7% YoY and fell short of our forecasts by 20.3%. However, despite challenges faced by its licensee Terumo Corp in Japan, BIG’s core drug-eluting stent (DES) business continued to perform well, with market share gains in key markets.
Other healthcare service providers also largely delivered growth
We note that other companies in the healthcare sector have largely performed well in 4Q12. Notably, IHH Healthcare Berhad (IHH) saw its revenue jump 79% YoY due to the consolidation of its Turkish subsidiary Acibadem Holdings and organic growth from existing operations. Core PATMI (excluding exceptional items and contribution from the sale of its Novena Medical Suites) increased 17%. Q&M Dental also grew its revenue (+16.0%) and PATMI (32.1%) by double-digits, driven by higher sales from existing dental outlets and contribution from new dental outlets in Singapore and Malaysia. However, not all healthcare service providers showcased positive growth trends, as Pacific Healthcare’s FY12 net loss of S$9.0m meant that it has now reported five consecutive years of net losses.
Maintain OVERWEIGHT
We believe that the growth trajectory of the healthcare sector remains positive in general, aided by steadfast industry fundamentals such as an aging population and rising affluence in the region which has bolstered the purchasing power of the middle-class. Hence we maintain our OVERWEIGHT rating on the sector. Both BIG and RMG have earmarked expansion plans to propel their growth moving forward. We believe that BIG’s recent share price decline could be partly due to the market getting jittery over the uncertainty of its acquisition timeline as interest payments from its recently issued S$300m fixed rate notes will kick in from Jul this year. However, we are optimistic that management would be able to finalise earnings accretive acquisition(s) in the near future as some of its M&A discussions are nearing completion, according to its 3QFY13 announcement. Organically, we expect BIG’s next-generation BioFreedom™ drug-coated stent to augment its growth from FY15. Hence we retain BIG [BUY; FV: S$1.63] as our preferred pick in the sector.
The healthcare companies under our coverage reported a contrasting set of results during the recently concluded 4QCY12 results season. While Raffles Medical Group (RMG) delivered double-digit YoY revenue and core PATMI growth of 14.9% and 13.8% respectively, which were in line with our expectations, Biosensors International Group’s (BIG) results were disappointing and missed ours and the street’s estimates. Its topline fell 4.0% YoY due to weak licensing and royalties revenue, while core earnings dipped 9.7% YoY and fell short of our forecasts by 20.3%. However, despite challenges faced by its licensee Terumo Corp in Japan, BIG’s core drug-eluting stent (DES) business continued to perform well, with market share gains in key markets.
Other healthcare service providers also largely delivered growth
We note that other companies in the healthcare sector have largely performed well in 4Q12. Notably, IHH Healthcare Berhad (IHH) saw its revenue jump 79% YoY due to the consolidation of its Turkish subsidiary Acibadem Holdings and organic growth from existing operations. Core PATMI (excluding exceptional items and contribution from the sale of its Novena Medical Suites) increased 17%. Q&M Dental also grew its revenue (+16.0%) and PATMI (32.1%) by double-digits, driven by higher sales from existing dental outlets and contribution from new dental outlets in Singapore and Malaysia. However, not all healthcare service providers showcased positive growth trends, as Pacific Healthcare’s FY12 net loss of S$9.0m meant that it has now reported five consecutive years of net losses.
Maintain OVERWEIGHT
We believe that the growth trajectory of the healthcare sector remains positive in general, aided by steadfast industry fundamentals such as an aging population and rising affluence in the region which has bolstered the purchasing power of the middle-class. Hence we maintain our OVERWEIGHT rating on the sector. Both BIG and RMG have earmarked expansion plans to propel their growth moving forward. We believe that BIG’s recent share price decline could be partly due to the market getting jittery over the uncertainty of its acquisition timeline as interest payments from its recently issued S$300m fixed rate notes will kick in from Jul this year. However, we are optimistic that management would be able to finalise earnings accretive acquisition(s) in the near future as some of its M&A discussions are nearing completion, according to its 3QFY13 announcement. Organically, we expect BIG’s next-generation BioFreedom™ drug-coated stent to augment its growth from FY15. Hence we retain BIG [BUY; FV: S$1.63] as our preferred pick in the sector.
Thursday, 22 November 2012
IHH Healthcare
CIMB Research on 20 Nov 2012
CALL it expensive or its valuations unjustified, but IHH has been defying the odds. In the last three months, it had debuted on two exchanges and stayed well above its IPO price. The question is, how defensive can the stock be after the results?
We are expecting a core EPS of 1.5 sen for Q3 2012 and 4.6 sen for nine-month 2012 (25 per cent and 77 per cent of FY2013 estimates respectively). FY2013 EPS has been reduced to factor in higher operating expenditures related items. Reiterate "outperform" rating and sum-of-parts target price ($1.53), with catalysts expected from ramp-up of Novena Hospital, and revenue intensity in all three key geographies.
Since listing, its stock price has not fallen below its IPO price for a single day, despite general misgivings about its valuations and growth potential. The healthcare company will be announcing Q3 2012 results next week.
During its results announcement, we will be watching out for: 1) Mount Elizabeth Novena's performance; and 2) the Acibadem Group in Turkey as Q3 is its off-season.
Even if results do fall below expectations, we don't anticipate a share-price collapse. In our opinion, the stock's ownership spread across various long investors underscores investors' confidence in IHH's sustained profitability and long-earned position as a world premier private-healthcare operator.
While investors are generally sold to the huge demand from medical travel and demographic changes like ageing populations, we think positive surprises may yet spring from IHH's ongoing integration and execution of other KPIs of Acibadem. There is a fair amount of synergies and value which may not be fully extracted this year, which should flow through in subsequent years.
We like the sector's defensive attributes and IHH's size in this sector. Further, we believe asset-recycling opportunities could emerge for its Malaysian assets in due course, with the freed capital to be redeployed to growth frontiers in Greater China.
OUTPERFORM
OUTPERFORM
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