- We maintain our
HOLD recommendation on IHH Healthcare Bhd (IHH), with an unchanged fair value
of RM3.25/share, based on a sum-of-parts valuation.
- GHK Hospital Ltd, a
60%-owned indirect subsidiary of IHH, has successfully won a public tender for
the acquisition of a site in Wong Chuk Hang, Hong Kong, as well as for the
construction, development and operation of a private hospital. The area
measures 27,500sqm, with a potential gross floor area of 46,750sq.
- IHH will be teaming
up with one of Hong Kong’s top property developers for the development of a greenfield
hospital. The estimated capital investment amounts to about RM2bil (inclusive
of the land cost amounting to RM675mil), to be financed via internal funds and
bank borrowings.
- The development of
the hospital is slated to be completed by late-FY16 with a total bed capacity of
500 beds. The hospital will offer a full range clinical services, with over 15
specialists. These include general medicine, general surgery, orthopaedics, and
gynaecology.
- Additionally, Li Ka
Shing Faculty of Medicine of the University of Hong Kong will act as the clinical
partner as well as oversee the clinical governance, professional standards,
appointment of doctors and the training of doctors, nurses and allied
healthcare staff.
- This latest
development is positive as it strengthens IHH’s international presence and
foothold in Hong Kong. Furthermore, opportunities exist in this huge and
under-served market, given the lack of quality healthcare coupled with growing
demand. Presently, IHH operates one hospital in Hong Kong through contractual
and trust agreements.
- More importantly,
the group has mapped up its expansion plans beyond FY15. Further to that, IHH
continues to widen its international market share beyond its three home
markets.
- All in, there is no
change to our earnings estimates at this juncture. Any earnings impact will likely
be seen from FY16F onwards.
- IHH has an implied
EV/EBITDA multiple of 19x for FY13F, which is at a 27% premium to its peers’ average
of 15x. We believe IHH’s strong franchise value and earnings trajectory have
been priced in. Having said, IHH’s expansion plan is well-mapped out and it
continues to lead in Singapore, Malaysia and Turkey.
Source: AmeSecurities
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