KUALA LUMPUR: IHH Healthcare Bhd, Asia’s largest hospital operator by market value, aims to add 3,000 beds to its existing 7,000 beds by 2017 through new hospitals.
“The 3,000-bed target includes new hospitals and expansion of existing hospitals. There’s a big one coming up in Hong Kong — a 500-bed hospital — and the other fairly sizeable one is Gleneagles Medina, which is opening in phases, as well as a few hospitals in Turkey,” managing director and chief executive officer Tan See Leng (pic) told reporters after the company’s annual and extraordinary general meetings yesterday.
IHH (fundamental: 1.65; valuation: 0.5), which counts Malaysia’s state investor Khazanah Nasional Bhd and Japan’s Mitsui & Co as its major shareholders, is constantly looking for mergers and acquisitions to grow, Tan said. It currently has 39 hospitals in 10 countries.
“Our growth will be driven by both brownfield acquisitions as well as greenfield growth. We know that we are in an actively growing mode and we know at this point in time our gearing ratio is low.
“If you look at the pipeline of beds that’s coming on-stream that we’ve already committed to, and the acquisitions we’ve closed, you will see that we are growing at a fairly fast pace,” said Tan.
At its current price-earnings ratio (PER) of 62 times, IHH is currently trading at rich valuations compared with its peers.
“IHH’s performance remains on track on the back of higher volumes, improved efficiency and more complex medical cases being undertaken at its hospitals. Nevertheless, we maintain “hold” on IHH as it currently trades at 50 times FY15F (forecast financial year 2015) PER vs the regional peer’s average of 35 times,” said AmResearch analyst Max Koh in a note on May 29.
In the first quarter (1Q) ended March 31, 2015, the group’s underlying operational earnings before interest, taxes, depreciation and amortisation (Ebitda) and profit after tax and minority interests (excluding exceptional items) achieved strong double-digit growth of 17% and 34% to RM452.4 million and RM214.7 million, respectively.
Group revenue was higher by 14% at RM2 billion. However, a weak lira had eroded group revenue and Ebitda. IHH also recognised a RM116.4 million exchange loss from the translation of Acibadem Holdings’ non-lira borrowings in 1Q of 2015, which amounts to US$300 million (RM1.12 billion).
According to Tan, IHH will progressively bring in more projects on stream this year.
“In Malaysia, Gleneagles Kota Kinabalu opened its doors last month, and we expect Gleneagles Medini to start operations later this year. We are also expanding Pantai Hospital Klang and Pantai Hospital Ayer Keroh in view of rising demand,” he said.
This article first appeared in The Edge Financial Daily, on June 16, 2015.