Malaysia hospital developments could uplift IHH earnings

It is also beginning to reap better contributions from Fortis.

IHH Healthcare delivered a strong start in 2019 as profits climbed 56.39% YoY to $21.49m (MYR89.51m). Its stellar performance is expected to be sustained amidst further development of hospitals in Pantai Manjung, Kota Kinabalu and Medini in Malaysia, according to UOB Kay Hian (UOBKH) analyst Phillip Wong.

The firm’s key markets saw impressive growth for the quarter with Malaysia’s total revenue growing 2% YoY. “The weakening ringgit attracted foreign patients, with Indonesian patient volumes surging 40% YoY. Against high fixed operating leverage, Singapore and Malaysia saw EBITDA earnings grow 31% and 22% YoY respectively,” Wong said in a report.

Moreover, the analyst noted that Q1 saw the first full quarter recognition of the contributions from Indian healthcare provider Fortis, where IHH holds 31% stake. Fortis contributed $18.42m (MYR77m) to IHH’s EBITDA from just $3.59m (MYR15m) in Q4 2018.

“Aside from the full quarter’s contribution, the improved contributions were attributed to the refinancing of loans, completion of the Religare Health Trust (RHT) acquisition and higher bed occupancy rates. Management expects the Indian Supreme Court to rule on the current stay order of IHH’s open offer for the remaining stake it does not own in Fortis by Q319,” he said.

Additionally, Wong believes that the previously mismanaged Fortis could draw on IHH’s deep bench of management from existing Indian operations, to beef up operations and to improve Fortis’ operational earnings every subsequent quarter over the near term.