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Research firms positive on IHH as borders reopen

27/05/2022 11:03 AM

KUALA LUMPUR, May 27 (Bernama) -- IHH Healthcare Bhd's (IHH) bed occupancy rate (BOR) is expected to improve in the coming quarters in Malaysia and Singapore, as deferred treatments resume and the COVID-19 Omicron situation subsides, said Maybank Investment Bank (Maybank IB).

The volume recovery, in its opinion, should be more than enough to offset the impact of normalising revenue intensity and reduction in COVID-19-related services. 

“Besides, the group will continue to make appropriate price adjustments to reflect cost inflation pressures. 

“As such, we maintain our 'buy' call on IHH with an unchanged target price (TP) of RM7.60, based on sum-of-parts (SOP)," Maybank IB said in a research note today. 

It noted that key risks to its call include rising interest rate (as 82 per cent of the total RM8.2 billion in borrowings are floating rate), prolonged weakening of the Turkish lira (as it runs Acibadem Healthcare group in Turkey), and slower-than-expected BOR recovery.

Meanwhile, Public Investment Bank believes that inflationary pressure could affect demand in the near term, while COVID-19-related services should be tapering off, given the easing infection rate. 

However, it is optimistic that IHH’s long-term earnings trajectory remains intact, supported by the management's proven track record in controlling costs as well as the returning of foreign patients following the easing of travel restrictions. 

“Long-term growth is further supported by megatrends such as the ageing population as well as rising consumer affluence," it said, maintaining its 'outperform' rating on IHH, with a revised SOP TP of RM7.60.

Public Investment Bank also revised its forecast earnings for IHH for financial years 2022-2024 (FY22-24) upwards by 13-15 per cent by assuming lower cost and higher revenue as it expects higher foreign patient volume due to the reopening of international borders.

Another research firm, Kenanga Research maintained its 'market perform' on IHH with its SOP-TP unchanged at RM6.65.

It noted that although IHH is optimistic about the rebound in its non-COVID-19 business going forward, some short-term headwinds such as the tapering of COVID-19-related revenues and inflationary pressure can be expected. 

The research house said IHH has taken proactive initiatives to partially mitigate the effects of lower patient volumes by improving the case-mix and by providing COVID-19 screening services. 

“As borders reopen and restrictions lifted, the group is ramping up its efforts to improve its core businesses by growing its domestic and foreign patient load back to pre-COVID levels,” said Kenanga Research.


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