IHH Healthcare IHH MK Sector: Healthcare & Pharmaceuticals

Transcription

1 Inpatient admissions accelerated in 1Q16 Core net profit grew by a tepid 5% yoy in 1Q16, but we deemed this in-line with expectations. Revenue and EBITDA grew by 24% yoy and 17% yoy in the quarter, driven by higher inpatient admission and revenue intensity. However, bottomline growth was relatively tepid due to start-up losses from the new hospitals opened in We expect earnings to pick up in subsequent quarters, as the new hospitals are ramped up. Maintain HOLD with a TP of RM Q15 results in line IHH booked a headline net profit of RM235.5m in 1Q16 (+37% yoy; -43% qoq). The sharp yoy growth was mainly due to non-recurring forex losses that were recognised in 1Q15. Excluding this, core net profit actually grew by a more tepid 5% yoy to RM238.3m in 1Q16, which we deem in-line. We expect earnings to pick up in subsequent quarters, as IHH ramp-up operations of the hospitals that were opened in the previous year. Segmental results commentary i. PPL Singapore. Revenue grew 21% yoy to RM913.5m in 1Q16, driven by higher inpatient admission (+7%) and stronger SGD (+7%). EBITDA margin rose 4ppts yoy to 26% in the quarter, backed by the continuous ramp-up of its Mount Elizabeth Novena Hospital. ii. PPL Malaysia. 1Q revenue grew by 13% yoy to RM391.3m, due to higher inpatient admission (+10%) and revenue intensity (+3% on price adjustments in early-2016). EBITDA margin fell 3ppts yoy to 27% in 1Q16, due to start-up losses from new hospitals that were opened last year: Gleneagles Kota Kinabalu, Gleneagles Medini. iii. PPL India. Indian revenue grew by 214% qoq to RM127.8m in 1Q16, due to the full consolidation of Global Hospitals which was acquired in Dec Segment LBITDA narrowed by 75% qoq to RM3.1m in 1Q16, as it recovered from the massive flood which took place in Chennai late last year. iv. Acibadem Holdings. 1Q revenue grew 14% yoy to RM836.0m, helped by higher inpatient admission (+17%) and revenue intensity (+7%). Strong inpatient growth was driven by the ramp up of Acibadem Atakent, and the contribution from the newly opened Acibadem Taksim. EBITDA margin fell 1ppt yoy to 19% in the quarter, due to start-up losses from Acibadem Taksim. Earnings & Valuation Summary FYE 31 Dec E 2017E 2018E Revenue (RMm) 7, , , , ,489.3 EBITDA (RMm) 1, , , , ,418.7 Pretax profit (RMm) 1, , , , ,130.0 Net profit (RMm) , , ,511.3 EPS (sen) PER (x) Core net profit (RMm) , , ,511.3 Core EPS (sen) Core EPS growth (%) Core PER (x) Net DPS (sen) Dividend Yield (%) EV/EBITDA (x) Results Note IHH Healthcare IHH MK Sector: Healthcare & Pharmaceuticals 26 May 2016 HOLD (maintain) Downside: 4.1% Price Target: RM6.25 Previous Target: RM6.16 (RM) May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 Price Performance 1M 3M 12M Absolute -2.4% +0.3% +10.7% Rel to KLCI +1.3% +2.3% +19.7% Stock Data Issued shares (m) 8,228.6 Mkt cap (RMm)/(US$m) 53,650.5/13,170.6 Avg daily vol - 6mth (m) wk range (RM) Est free float 19.7% BV per share (RM) 2.69 P/BV (x) 2.42 Net cash/ (debt) (RMm) (1Q16) (4,433.4) ROE (2015E) 4.8% Derivatives Nil Shariah Compliant Yes Key Shareholders Khazanah Nasional Bhd 43.4% Mitsui & Co Ltd 20.1% Employee Provident Fund 8.6% Source: Affin Hwang, Bloomberg Tan Kee Hoong, CFA (603) keehoong.tan@affinhwang.com Chg in EPS (%) Affin/Consensus (x) Source: Company, Affin Hwang estimates Page 1 of 5

2 Maintain HOLD with a TP of RM6.25 Although 1Q16 results was in-line, we are taking the opportunity to make some housekeeping adjustments following the finalisation of 2015 accounts, which led us to revise our 2016/17/18E core net profit forecasts by +2%/+4%/+5%. In-line with the earnings revision, we also revise our TP to RM6.25 (previous: RM6.16), based on SOTP valuation. We maintain our HOLD rating on the stock, as we believe the group s earnings prospects have already been priced in at current valuation (23x 2016E EV/EBITDA). 1Q16 analyst teleconference highlights i. Integration of the newly acquired Continental Hospitals (Mar 2015) and Global Hospitals (Dec 2015) are progressing well. Postacquisition, the performance of Continental Hospitals has been inline with management targets. ii. Management remains on the look-out for new M&A targets. Key criteria for potential targets are: (1) must be aligned to IHH s strategy to serve the premium markets, (2) existence of valueadding opportunities (i.e. procurement synergies, etc), and (3) allow IHH to acquire strategic beachhead at key growth markets. iii. Application of the regulatory approvals for the medical suites at Gleneagles Medini is at its final stages. Once this is sorted out, IHH will be able sell the 160 medical clinic suites, which are targeted for completion in iv. As at end-1q16, 180 beds are currently operational at the group s flagship Mount Elizabeth Hospital in Singapore. Management is looking to open-up the remaining 70 beds by 1H17. v. Management has implemented a price adjustment exercise in Malaysia in early-2016, in order to tackle the cost inflation. Postadjustments, average price for the Malaysian hospitals was estimated to have increased by 3%. Page 2 of 5

3 Fig 1: Results comparison FYE 31 Dec (RMm) 1QFY16 QoQ* YoY* 3MFY16 YoY* Comments Revenue 2, , Revenue grew by 24% helped by: (1) higher inpatient admissions across all key homemarkets (i.e. Singapore, Malaysia, Turkey), and (2) higher revenue intensity, due weaker MYR, price adjustments and more complex cases. Op costs (1,871.2) (1,871.2) 25.7 EBITDA (2.0) EBITDA margin (%) ppt -1.3ppt ppt EBITDA margin was dragged by start-up losses from the new hospitals that were opened in 2015: Gleneagles Medini, Gleneagles Kota Kinabalu, and Acibadem Taksim. PPL India was also a drag on margins, as they are currently loss-making. Depn and amort (200.1) (200.1) 25.6 EBIT (4.1) EBIT margin (%) ppt -1.4ppt ppt Int expense (64.3) (64.3) 64.4 Int and other inc 17.8 (12.5) (42.4) 17.8 (42.4) Associates & JVs 3.5 (9.3) EI (5.8) (103.4) 95.0 (5.8) 95.0 Forex losses on borrowings Pretax profit (36.9) Core pretax (7.7) Tax (83.3) (83.3) 59.3 Tax rate (%) ppt 1ppt ppt MI (36.6) (69.1) (36.6) Net profit (43.4) EPS (sen) 2.9 (43.4) Core net profit In line with our and consensus forecasts. Source: Affin Hwang, company data Page 3 of 5

4 Fig 2: Segmental breakdown FYE Jan 31 2Q15 3Q15 4Q15 1Q16 QoQ YoY 3MFY15 3MFY16 YoY Revenue (RMm) 2, , , , , , PPL - Singapore PPL - Malaysia PPL - North Asia PPL - India PPL - Others Acibadem Holdings IMU Health Plife REIT Others EBITDA (RMm) PPL - Singapore PPL - Malaysia PPL - North Asia PPL - India PPL - Others Acibadem Holdings IMU Health Plife REIT Others EBITDA Margin (%) 26% 24% 27% 24% -2% -1% 26% 24% -1% PPL - Singapore 24% 23% 24% 26% 2% 4% 22% 26% 4% PPL - Malaysia 33% 28% 25% 27% 3% -3% 31% 27% -3% PPL - North Asia 25% 10% 16% 16% 0% -3% 19% 16% -3% PPL - India -14% -1% -31% -2% 28% N/A N/A -2% N/A PPL - Others 47% 43% 38% 49% 12% 4% 45% 49% 4% Acibadem Holdings 18% 14% 18% 19% 0% -1% 20% 19% -1% IMU Health 34% 33% 33% 40% 7% -1% 40% 40% -1% Plife REIT 223% 218% 457% 210% -247% -26% 236% 210% -26% Others -356% 66% -924% -242% 681% N/A N/A -242% N/A Source: Affin Hwang, Company Fig 3: SOTP valuation for IHH Healthcare Value (RM m) Value per share (RM) Remarks Parkway Pantai Limited (100% equity stake) 37, NPV of FCFF (7.9% WACC, 4% LTG) less net debt Acibadem Holdings (60% equity stake) 8, NPV of FCFF (8.7% WACC, 4% LTG) less net debt IMU Health (100% equity stake) 1, x 2016 P/E; in-line with SEG International Apollo Healthcare (22% equity stake) 2, days VWAP at RM0.0587/INR Parkway Life REIT (35.7% equity stake) 1, days VWAP at RM2.95/SGD SOP Equity Value 51, Source: Affin Hwang estimates, Company Page 4 of 5

5 Equity Rating Structure and Definitions BUY Total return is expected to exceed +10% over a 12-month period HOLD Total return is expected to be between -5% and +10% over a 12-month period SELL Total return is expected to be below -5% over a 12-month period NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months. OVERWEIGHT Industry, as defined by the analyst s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months NEUTRAL Industry, as defined by the analyst s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months UNDERWEIGHT Industry, as defined by the analyst s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) (formerly known as HwangDBS Investment Bank Berhad) ( the Company ) based on sources believed to be reliable. However, such sources have not been independently verified by the Company, and as such the Company does not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or rendered in this report. Facts, information, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units within the Company, including investment banking personnel. Reports issued by the Company, are prepared in accordance with the Company s policies for managing conflicts of interest arising as a result of publication and distribution of investment research reports. Under no circumstances shall the Company, its associates and/or any person related to it be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Any opinions or estimates in this report are that of the Company, as of this date and subject to change without prior notice. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities. The Company and/or any of its directors and/or employees may have an interest in the securities mentioned therein. The Company may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences and hence an independent evaluation is essential. Investors are advised to independently evaluate particular investments and strategies and to seek independent financial, legal and other advice on the information and/or opinion contained in this report before investing or participating in any of the securities or investment strategies or transactions discussed in this report. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. The Company s research, or any portion thereof may not be reprinted, sold or redistributed without the consent of the Company. The Company, is a participant of the Capital Market Development Fund-Bursa Research Scheme, and will receive compensation for the participation. This report is printed and published by: Affin Hwang Investment Bank Berhad (14389-U) (formerly known as HwangDBS Investment Bank Berhad) A Participating Organisation of Bursa Malaysia Securities Bhd Chulan Tower Branch, 3rd Floor, Chulan Tower, No 3, Jalan Conlay, Kuala Lumpur. affin.research@affinhwang.com Tel : Fax : Page 5 of 5