KUALA LUMPUR (Aug 29): IHH Healthcare Bhd said it has been de-risking its lira-denominated revenue exposure as the hospital operator recognises the potential impact of the hyperinflationary environment in Türkiye where inflation had exceeded 100%.

"In Türkiye, cumulative inflation rates over a three-year period had exceeded 100% as at April," IHH said in its latest corporate presentation slides in conjunction with an analyst briefing organised by the company, which has a presence in 10 countries including Malaysia, Singapore, Türkiye and India.

The analyst briefing was in conjunction with the Thursday (Aug 25) announcement on IHH's financials for the second quarter ended June 30, 2022 (2QFY22).

IHH said on its website that in Türkiye, Bulgaria, Macedonia, the Netherlands and Serbia, IHH's Acibadem Healthcare Group looks after the healthcare needs of the group's patients through a network of 22 hospitals and 18 medical centres, as well as ancillary services such as diagnostics.

"In addition, Acibadem helps build Türkiye as a trustworthy health hub to international medical tourists, with our 39 representative offices or health points located in 22 countries and 38 cities," IHH said.

On Monday (Aug 29), CGS-CIMB Securities Sdn Bhd analyst Tay Wee Kuang, who attended IHH's analyst briefing, wrote in a note that as of the first half ended June 30, 2022, IHH's non-lira business in Acibadem formed 46% of IHH's total revenue, up from 33% in FY17.

"This was a result of increasing the attractiveness of Acibadem to foreign patients, as well as expanding its footprint into Europe to diversify the currency risk.

"Post IHH's analyst briefing, we remain optimistic on further recovery in its core businesses, with scope for improvement in operational metrics," he said.

In economics, the term "hyperinflation" refers to a situation in which inflation, as measured by the consumer price index, rises more than 50% a month.

On Aug 18, it was reported that Türkiye's central bank shocked markets on that day by cutting its main interest rate by 100 basis points to 13%, saying it needed to keep driving economic growth despite inflation hitting nearly 80% and a monetary tightening trend among its peers worldwide.

"The lira dropped as much as 1.2% to 18.15 per dollar as the bank took its latest step down the unorthodox policy path advocated by President Tayyip Erdogan that aims to provide targeted cheap credit to help boost Turkish exports," Reuters reported.

From a Malaysian viewpoint, the ringgit has also strengthened against the weakening lira, which means IHH's lira-denominated revenue will be less when converted into the ringgit.

At the time of writing on Monday, the ringgit has strengthened to about 25 sen against the lira from 50 sen a year earlier.

Tay said CGS-CIMB, which reiterated its "add" call for IHH shares, however, lowered its target price (TP) for the stock to RM8.07 from RM8.12 previously.

"[IHH's] management recognises near-term challenges, including inflationary pressures, but remains on track with its long-term growth strategy," Tay said.

Meanwhile, TA Securities Holdings Bhd analyst Tan Kong Jin, who also attended IHH's analyst briefing, wrote in a note on Monday that TA maintained its TP for IHH shares at RM7.08 while reiterating its "hold" call on the stock.

"Overall, short-term headwinds such as global inflationary trends and rising interest rates will put pressure on [IHH's] costs [especially energy and staff costs].

"In order to mitigate some of the cost pressures, IHH targets to improve volumes further [and implement] appropriate price adjustments and cost optimisation.

"Given the inelastic demand for private healthcare, we believe that [IHH's] core operations will remain resilient in [the second half of 2022]," Tan said.

On Thursday (Aug 25), IHH reported that 2QFY22 net profit rose to RM612.1 million from RM483.31 million a year earlier while revenue was higher at RM4.37 billion versus RM4.27 billion.

For 1HFY22, IHH said cumulative net profit climbed to RM1.11 billion from RM858.93 million a year earlier while revenue increased to RM8.54 billion from RM8.22 billion.

At Bursa Malaysia on Monday, IHH's share price closed down three sen or 0.47% at RM6.34 for a market capitalisation of about RM55.86 billion.

IHH has 8.81 billion outstanding shares, according to the company's Bursa filing on Aug 3.