IHH Healthcare: BUY S$1.24; Bloomberg: IHH SP
A good start;
Price Target : 12-Month S$ 1.38 (RM 3.44)
· 2Q net profit surged due to medical suite sales, Acibadem consolidation
and valuation gains on investment properties
· 1H12 core profits forms 49% of FY12F (ex. medical suites)
· Promising start for Novena hospital, expect positive EBITDA by 2H13
· Maintain Buy, TP: S$1.38 (RM3.44)
2Q within expectations. 2Q net profit surged 426% to RM403.5m while revenue
increased by 231% to RM2.7bn. The surge in topline was contributed by the
consolidation of Acibadem Holdings, coupled with the recognition of sales
of 216 Novena medical suites (RM1.2bn). Net profit was also aided by
valuation gains of RM132.6m on investment properties at Novena Hospital.
Excluding the sale of medical suites and exceptional items, group PATMI was
RM109.7m, up by 33% from a year ago. 1H12 PATMI at RM250.3m (ex. medical
suites and exceptional items) accounts for c.49% of our FY12F.
A 'promising start' for Novena Hospital. Despite pre-operating costs of
RM28.3m, management indicated that Novena Hospital was off to a 'promising
start', and should be EBITDA positive by 2H13, barring any unforeseen
circumstances. Elsewhere, inpatient admissions and average revenue per
inpatient in its home markets continued to improve y-o-y, tracking our
projections.
Maintain Buy, TP unchanged at S$1.38 (RM3.44). Maintain Buy recommendation
with sum-of-parts based TP at S$1.38 (RM3.44). We reiterate our view that
IHH is an attractive healthcare play in the region with a robust growth
profile, offering investors a unique and diverse geographical exposure.
While trading at a premium to peers, we believe this could be justified
given that net profit growth is expected to be robust, with projected CAGR
(FY11 - 14F) of 55%.
