IHH 4Q net profit up 4%, declares 3 sen dividend

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KUALA LUMPUR (Feb 26): The worlds' second largest healthcare player by market capitalisation, IHH Healthcare Bhd, announced that its net profit for the fourth quarter ended Dec 31, 2014 (4QFY14) rose 4% to RM239.23 million or 2.93 sen per share from RM230.1 million or 2.83 sen per share in 4QFY13, while revenue went up 9% to RM1.94 billion from RM1.78 billion previously.

The group said its 4QFY13 earnings were due to exceptional gains such as a valuation gain on its investment properties at Mount Elizabeth Novena Hospital and Specialist Centre, a write back of impairment loss on financial assets, and investment tax allowance claims, its filing to Bursa Malaysia today showed.

Excluding these exceptional items, IHH (fundamental: 1.65; valuation: 1.5) said its net profit in 4QFY14 jumped 42% to RM244.2 million from RM172.12 million in 4QFY13.

As for revenue, IHH attributed the revenue increase to higher inpatient admissions and revenue intensities from existing operations, as well as the commencement of operations of the newly opened hospitals in Turkey and Malaysia.

It also proposed a first and final single-tier cash dividend of 3 sen per share in FY14, subject to shareholders' approval, as compared to a dividend of 2 sen per share announced in FY13.

For its full FY14, IHH registered a 20% increase in net profit to RM754.29 million or 9.24 sen per share from RM631.16 million or 7.78 sen per share on the back of its earnings before interest, tax, depreciation and amortisation (EBITDA) growth, which in turn was partly driven by its revenue, which grew 9% to RM7.34 billion from RM6.76 billion previously.

"In addition, the Group's YTD 2014 EBITDA included RM52.7 million revaluation gain arising from PLife REIT's investment properties that are held for rental to external parties as compared to RM4.4 million revaluation loss recognised last year. Moreover, PLife REIT recognised divestment gain of RM36.4million from its sale of 7 Japanese nursing homes in December 2014," it noted.

Going forward, IHH expects cost pressures from wage inflation due to increased competition for trained healthcare personnel as well as the forthcoming implementation of a Goods and Services Tax (GST) in Malaysia.

"The Group expects to mitigate its impact by adjusting prices and improving operating leverage as patient volumes continues growing...it would continue to monitor and minimise currency risks proactively," it added.

IHH added that it demand for quality private healthcare should remain strong for its home markets and its surrounding regions.

"With the expansion of existing facilities and the opening of new facilities across its home markets, which will deliver more than 9,000 new beds by 2017, IHH has sufficient capacity to support this increased demand. This would in turn drive revenue growth," IHH said.

The stock ended unchanged at RM5.48 this evening, giving it a market capitalisation of RM44.57 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)