KUALA LUMPUR (Dec 8): Organic expansion and expansion across the healthcare continuum are the top two priorities of IHH Healthcare Bhd as the strategy moving forward, said TA Securities, citing IHH group chief executive officer Dr Prem Kumar Nair.
In a note on Friday, the research house said IHH will be adding about 3,800 beds over the next five years, mostly in India, Malaysia, and Türkiye.
It said Prem believes that brownfield expansion is the best option, given the faster ramp-up, recruitment of doctors, and lower capital expenditure of 30%-40% compared to greenfield expansion, which typically takes around three to five years to achieve earnings before interest, taxes, depreciation, and amortisation (Ebitda) breakeven.
“We understand that some of the additional bed space will come from moving its administrative space, physiotherapy department, and medical records to buildings or shoplots located adjacent to its hospitals.
“In Singapore, beds are packed. As such, IHH Singapore is decanting into the primary care business, moving out departments and services, such as endoscopy and fertility, to create space for higher-intensity services,” Prem told analysts in a briefing, according to TA Securities.
Meanwhile, IHH will expand across the healthcare continuum by growing ambulatory care offerings and improving primary care penetration, especially in Singapore (with it recently opening its first Ambulatory Care Centre [ACC] facility, and Parkway MediCentre at Woodleigh), and in Hong Kong (with the third ACC to open on Jan 24).
IHH believes that the opening of more ACCs would help to expand volumes and drive hospital intensity higher.
India’s operations will be one of the key drivers of the group (via Fortis Healthcare and Gleneagles India), and it sees further opportunities to expand margins (an around 20% Ebitda margin over the next 12 months), as India is the fastest-growing healthcare market.
IHH targets to improve underperforming assets in China by increasing patient volumes via integration of referrals between Parkway Shanghai Hospital and four of its clinics in Shanghai, as well as refreshing its clinic facilities and environment.
At the same time, the group is also looking at Indonesia and Vietnam for possible acquisitions.
Believing the new vision and directions can bring IHH to the next level in terms of profitability and operational efficiency, TA Securities reiterated its “hold” recommendation on the group, with an unchanged target price of RM6.30 per share.
At the time of writing on Friday, IHH was three sen or 0.52% higher at RM5.85 per share, translating into a market capitalisation of RM51.52 billion.