IHH Healthcare Berhad
(IHH) is the guardian of private healthcare focusing on markets in Asia with
commanding market positions in Singapore,
Malaysia and Turkey. We believe the
healthcare industry is expected to continue to see stable growth supported by a
growing healthcare expenditure, rising medical insurance and aging population
demographics. The healthcare services sector earnings are considered defensive
as well as having a captive earnings stream. We are initiating coverage on IHH
with a MARKET PERFORM recommendation and TP of RM3.51 based on a sum-of-parts valuation.
Despite the scarcity premium that we have attached to IHH units given its sheer
size, commanding market position and superior growth potential, IHH is
currently trading close to our target price.
Exposure to a network
of healthcare jewels with commanding market positions. IHH offers investors
exposure to a network of healthcare jewels with commanding market positions. In
Singapore, IHH via Parkway is the largest private healthcare provider with a
market share of approximately 43.9%. In
Malaysia, through the Pantai and Gleneagles brands, it is the second largest
private healthcare provider in the country in terms of the number of licensed
beds, with a market share of approximately 15.1%.
Solid captive markets
in growth locations. In Turkey, its
Acibadem. Strategically located between Europe, Asia and the Middle East,
Turkey has emerged as one of the most popular destinations for medical travels
in the CEEMENA region (Central & Eastern Europe, the Balkans, Turkey, the
Middle East and North Africa), with an estimated 125,000 medical travellers in
2011. IHH’s Acibadem hospital network is the largest private healthcare
provider there with a 5.2% market share and caters to over 19,000 foreign
patients in 2011.
Strong recognisable
brands with a reputation for clinical excellence. IHH’s key hospitals are
recognised for regularly performing complex and high intensity clinical
procedures requiring highly experienced surgeons and advanced facilities,
adopting global best practices and achieving outstanding patient outcomes. The
standard of its healthcare services has been acknowledged via renowned
international and regional quality accreditation.
Expansion program to
drive growth. IHH is embarking on an expansion plan to drive growth over
the next few years. IHH’s pipeline will deliver over 3,300 new beds through new
hospital developments and the expansion of its existing facilities over the
next five years, which includes two potential hospital development projects in
Turkey, of which negotiations are ongoing. These new beds also include approximately
760 new beds in facilities that IHH expects to manage through hospital
management agreements over the next five years.
Initiating coverage
on IHH with a MARKET PERFORM recommendation. Given the highly defensive and
captive earnings streams in the healthcare services, we are using the EV/EBITDA
valuation methodology in our sum-of-parts valuation. We are
initiating coverage on IHH with a MARKET PERFORM recommendation and TP
of RM3.51 based on a sum-of-parts valuation. Despite the scarcity premium that
we have attached to IHH units given its sheer size, commanding market position
and superior growth potential, IHH is currently trading close to our target
price.
Source: Kenanga
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