This article first appeared in The Edge Malaysia Weekly on August 28, 2017 - September 3, 2017

Healthcare is not an exciting sector. It is defensive, and growth does not come quickly. But with a combination of patience and diligence, it can prove to be a rewarding business.

Investors who bought IHH Healthcare Bhd shares just over three years ago, for instance, would have seen the value of their investment rise over 52%, from RM3.78 per share at end-March 2014 to RM5.75 end-June 2017 — the evaluation period that gave IHH the top spot for highest return to shareholders over three years for the Super Big Cap Companies category. The annualised total return was 13.8%, beating eight other The Edge Billion Ringgit Club members with a market Capitalisation of over RM40 billion.

It is a stellar achievement for the healthcare group, which has been focused on expanding its footprint beyond its home markets — Malaysia and Singapore.

“Taking an Asian company global is no easy feat. The last few years, marked by global macroeconomic and geopolitical uncertainty, are challenging for any business. But it also means opportunity,” managing director and CEO Dr Tan See Leng tells The Edge.

It certainly has not been smooth sailing for the Khazanah Nasional Bhd’s regional healthcare venture, which first listed in Malaysia and Singapore in 2012. The group has had to battle currency depreciation in developing markets like Turkey.

Nonetheless, IHH’s revenue has grown an impressive 48% to RM10.02 billion (as at FY2016) over the past three years. That works out to a compound annual growth rate of 14.05%. At the same time, the group’s earnings before interest, taxes, depreciation and amortisation expanded 38% to RM2.28 billion, or a CAGR of 11.25%.

“Expanding globally means more intense competition, with the battle for talent at theforefront. We strive to engage our staff, integrate those from acquired assets, and effect knowledge and best practice transfer across our operations,” says Tan.

“This has solidified our foothold in our home markets of Malaysia, Singapore, Turkey and India and laid the groundwork to expand our presence in Greater China. Our efforts ensure patients continue to get the superior and consistent medical care they’ve come to expect at any of our hospitals in 10 countries,” he says.

It is worth noting that this growth has not been reflected in the group’s earnings per share in 2016 of 7.44 sen, which was weighed down by foreign exchange losses and other exceptional items. In FY2013, EPS was 7.78 sen.

However, stripping out the one-offs and pricing in the growth from maturing investments, IHH’s earnings are also expected to pick up.

TA Securities, in a report, expects IHH’s EPS to grow by 32% year on year in FY2017 as profits normalise. This translates to an EPS of 16.9 sen. Looking ahead, Tan says, “We expect disruptive change in the business of healthcare delivery. We embrace innovation to keep our competitive edge while maintaining excellence in existing operations. Our approach will be balanced, with a view of creating sustainable growth not just for our investors, but for all of our stakeholders.”

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