IHH Healthcare 1QFY15 profit grows 7.8%

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KUALA LUMPUR (May 28): IHH Healthcare Bhd’s net profit increases 7.8% on-year to RM171.48 million, or 2.1 sen per share, in the first quarter ended March 31 (1QFY15) from RM159.05 million or 1.96 sen per share in the previous corresponding period on higher inpatient admissions and overall revenue growth.

In a filing with Bursa Malaysia, IHH Healthcare (fundamental: 1.65; valuation: 0.7) posted a 13.6% increase in revenue to RM2 billion in 1QFY15 compared to RM1.76 billion in the first quarter of financial year 2014 (1QFY14).

In a press release, IHH Healthcare said earnings before interest, tax, depreciation, amortisation (EBITDA) expanded 16% to RM506 million, while profit after tax and minority interests (PATMI) excluding exceptional items grew 32% to RM227.8 million.

“The increase in revenue and EBITDA were primarily driven by higher inpatient admission, overall revenue intensities and the ramp up of operations of Acibadem Atakent Hospital in Turkey as well as Pantai Hospital Manjung in Malaysia - both of which opened in 2014.

“Stripping out the effects of Parkway Life Real Estate Investment Trust (PLife REIT), the group’s underlying operational EBITDA and PATMI (excluding exceptional items) achieved strong double-digit growth of 17% and 34% to RM452.4 million and RM214.7 million respectively,” the statement read.

IHH Healthcare also said the group reaped the benefits of its diversified operations across 10 countries, as a strong Singapore dollar helped to offset the translational loss of a weak Lira to the group’s reporting currency, the ringgit.

The company noted that it incurred RM116.4 million in exchange loss from the translation of Acibadem Holdings’ non-Lira borrowings in 1QFY15.

IHH Healthcare said its net gearing edged up marginally on higher loans taken out to fund expansion and acquisition plans, including the purchase of a 51% stake in India’s Continental Hospitals on March 23, but remained at a healthy level of 0.11 times, while cash balance stood at RM2.2 billion.

IHH Healthcare managing director and chief executive officer Dr Tan See Leng said the company reaffirms its differentiated strategy of expanding in high-growth markets while delivering organic growth and ramping up new hospitals quickly.

“We look forward to a strong pipeline of beds coming on-stream this year and we will continue to extract operating leverage from our diversified operations,” he added.

On prospects, IHH Healthcare expects cost pressures from wage inflation given the increased competition for trained healthcare personnel as well as from the implementation of a goods and services tax (GST) in Malaysia.

“We aim to mitigate the impact by adjusting prices equitably and improving operating leverage as patient volumes continue to grow.

“The group’s diverse geographical footprint also makes it susceptible to currency volatility. Therefore, IHH will continue to monitor and manage currency risks proactively,” the statement read.

The company said it expects to see several notable projects come on stream to contribute to the group’s revenue this year.

In Turkey, Acibadem Taksim Hospital and a new cancer centre at Acibadem Bodrum Hospital are slated for completion while the expansion at Acibadem Sistina Skopje Hospital in Macedonia is also expected to be concluded in 2015.

Zekeriyakoy Medical Centre, which is located next to Acibadem Maslak Hospital, commenced operations in April 2015 and will contribute to Acibadem Holdings’ revenue in subsequent quarters.

In Malaysia, Gleneagles Kota Kinabalu commenced operations in May 2015 and will contribute to the group’s revenue as it progressively ramps up.

In addition, IHH’s recent acquisition of India’s Continental Hospitals will begin contributing to group performance from the second quarter of financial year 2015 (2QFY15) onwards.

IHH Healthcare share price hit record high of RM6 in March. The stock closed at RM5.80 today, up five sen, with a market capitalisation of RM47.243 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.)