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.