PETALING JAYA: IHH Healthcare Bhd is on the lookout for value-accretive merger and acquisition (M&A) activities, especially in Malaysia, India, Turkiye and Europe, even though there is no lack of organic growth opportunities for the group.
The M&A focus on these countries is due to the fact that IHH can leverage its cluster strategy to further improve profitability.
The four countries aside, CGS International (CGSI) Research said IHH also continues to explore opportunities to expand into Indonesia and Vietnam as well. The private healthcare operator’s expansion plans are supported by its healthy balance sheet and a low net gearing of 0.26 times as of the first quarter of 2024 (1Q24).
Currently, among the healthcare brands under IHH are Gleneagles, Pantai, Parkway, Mount Elizabeth, Fortis and the Prince Court Medical Centre.
CGSI Research highlighted that since its 3Q23 analyst briefing, IHH has laid out its organic growth plans to add about 4,000 beds across its key operating regions by 2028. Even with a slight decline in operational bed capacity in 1Q24 (12,166 beds) from 4Q23 (12,307 beds), IHH has been able to observe organic growth through improving case mix to drive revenue intensity.This includes Singapore, where such capacity expansion is limited.
Post-1Q24 results, CGSI Research said IHH’s increased revenue intensity across all key operating regions has driven its core profitability. The group saw revenue grow 15.8% year-on-year (y-o-y) to a record RM5.96bil in 1Q24.
All key operating business units recorded y-o-y revenue growth to support earnings before interest, taxes, depreciation, and amortisation (Ebitda) growth with the exception of Malaysia, which had a 4% decline in Ebitda as a result of an initiative to reward healthcare workers.
Revenue growth was predominantly driven by double-digit growth in revenue per inpatient y-o-y across key operating regions, while total inpatient admissions were relatively stable.
Revenue per inpatient growth in Malaysia and Singapore grew by 10% and 15%, respectively. In the Turkiye and Europe region, it was 51% and in India, it was 11%.
“We keep our estimates unchanged and maintain our ‘add’ call as we are positive on IHH’s various levers of growth across its operating regions.
“Re-rating catalysts are better communication of impact from MFRS129 on core underlying performance that excludes hyperinflationary environment in Turkiye, sustained improvement in Ebitda margins for India and Turkiye and Europe, as well as an accelerated increase in bed capacities to support higher inpatient volumes.”