12 / 24
restructured its borrowings to
reduce exposure to the US$,
replacing said currency with
more Euros. Its current total
borrowings are made up of
33% Euro, 24% S$, 9% US$,
22% Yen amongst others.
IMU Health runs the
International Medical
University. ParkwayLife
REIT is one of Asia’s largest
listed healthcare real estate
investment trusts; it is also
managed by the group.
The REIT currently owns
Mount Elizabeth Hospital,
Gleneagles Hospital and
Parkway East Hospital, which
are all leased by IHH. They
were sold to the REIT to fund
the construction of Mount
Elizabeth Novena Hospital.
Table 1
shows the current
expansion projects of IHH.
Its latest hospital,
Gleneagles Medini in Johor,
was recently completed, and
operations commenced in
Nov 2015. Phase 1a includes
150 beds. The hospital
will be part of Singapore’s
Medisave programme in which
TURN TO PAGE 13
This week,
i
Capital provides
an update on IHH Healthcare
Bhd (IHH), which was listed
on the KLSE and Singapore
stock exchange in Jul 2012.
To recapitulate,
the main business
of the group is
providing healthcare
services; it
currently has over
7,000 licensed
beds across 40
hospitals. For more
information on how
a hospital generates
revenue, please
refer to
i
Capital
dated 7 Jan 2016.
Unlike KPJ Healthcare,
which is predominantly
Malaysia-focused, IHH is
an international healthcare
service provider in Asia,
Central & Eastern Europe, the
Middle East and North Africa
(CEEMENA). It is divided into
4 main subsidiaries: Parkway
Pantai Limited, Acibadem
Holding, IMU Health S/B and
Parkway Life REIT.
Figure 1
shows the sales breakdown
as at 9 months for financial
year (FY) 2015.
Parkway Pantai’s
operations are divided into 3
regions; namely, Malaysia,
Singapore and International
(China/Hong Kong, India,
Brunei, and the UAE). In
Malaysia, the group is the
second largest private
healthcare provider with 14
hospitals under the brands
Pantai and Gleneagles. In
Singapore, IHH owns and
operates Mount Elizabeth
Novena Hospital, Mount
Elizabeth Hospital, Gleneagles
Hospital and Parkway East
Hospital. Even among private
hospitals in Singapore, IHH’s
hospitals are considered
as premium. In China, IHH
operates 12 medical centres,
some on its own, some via
clinic/hospital management
agreements (CMA/HMA) and
joint ventures.
For India, the group owns a
10.8% stake in Apollo Hospital
Enterprise Limited (Apollo
Hospital), one of India’s
largest private healthcare
providers; it also has joint
ventures with the company.
In 2015, IHH acquired a
51% and 73.4% stake in
Continental Hospital
and Ravindranath
GE Medical
Associates Private Ltd
respectively. The latter
RM819 mln acquisition
was for a chain of 5
tertiary/quaternary
hospitals and 3 feeder
centres with 1,100
operational beds
under the brand name
Global Hospitals (GH).
GH was founded by a
team of doctors that
specialise in kidney/
liver transplants.
Currently GH is
loss-making, primarily
because they do
not have sufficient
funds to ramp up
their operations. In
fact, they were forking out
of their own pockets to pay
off the interests/principals
of their borrowings. The
borrowing cost in India is
high at 12-15%. Hence, they
decided to sell their stakes
to the group. The hospitals
are located in Hyberabad,
Bangalore, Chennai and
Mumbai, all of which are
Metro cities in the Southern
part of India. Regarding Apollo
Hospital, IHH may seek to
buy up a controlling stake
in the future. As of now, its
82-year-old founder, who is
still going strong, wants to
keep the business, which is
currently generating around
RM220 mln in earnings.
Under Acibadem Holding,
IHH owns 16 hospitals in
Turkey (where it is the leading
provider), 1 in Macedonia
and 1 in Iraq (via HMA), as
well as 12 medical centres.
Despite making up more than
one-third of total sales, its
contribution to the bottom line
over the past few years has
not been significant. This is
because there are 4 hospitals
that are still in their gestation
periods. Over time, the scale
needs to beramped up in
order for IHH to break even.
The expected turnaround
will occur from 2017 up to
2020 for the 4 hospitals.
For 9M FY2015, Acibadem
made a loss of RM214.5
mln. This was due to its
foreign currency exposure
from the depreciation of the
Turkish Lira against its major
borrowing currencies, the
US$ in particular. A 5-year
tenure loan in Lira is hard to
come by, with only a 3-year
tenure available. The longer
tenure is desired because the
funding would then be split
between a 3-year period of
building up the hospital and 2
years of working capital. The
Lira has been under pressure
as a result of its central
bank’s policy statements as
well as the instability of the
country’s political climate
and national security. Other
than Acibadem, the group
practices a policy of borrowing
in the same currency as
its foreign operations,
thereby minimising currency
risks. The group has since
“Listed on the KLSE
and Singapore stock
exchange in Jul 2012,
the main business of
the group is providing
healthcare services.”
Source:
www.financeasia.comMount Elizabeth Hospital
B.1. IHH Healthcare (IHH, 5225)
Principal activities
Healthcare services provider.
Major shareholder/s
Pulau Memutik Ventures S/B
(wholly owned by Khazanah).
Latest paid-up
8.22 bln shares of RM1.00
each
Market capitalisation
RM53.4 bln @ RM6.50
2016 PE Ratio
Around 71 times @ RM6.50
Source: Company data, Capital
Dynamics.
3rd quarter RM mln
30/9/15 30/9/14
Sales
6,161 5,407
Pretax profit
654.8 792.2
Net profit
518.1 515.1
Finance cost
486.0 153.5
Depreciation 445.6 414.0
Cash & cash
equivalents
2,097 2,468
Financial Highlights (RM mln) - 31 December
2011
2012
2013
2014
Gross revenue
3,329
6,963
6,757
7,344
Pretax profit
483.1
1,058
881.6
1,221
Net profit
373.5
750.8
631.2
754.3
Adjusted net profit
341.6
472.4
500.7
562.8
Depreciation
165.8
442.4
531.9
541.3
Finance cost
106.4
222.2
328.7
189.8
Current assets
3,100
2,738
3,401
3,741
Current liabilities
1,810
1,901
1,843
2,358
Fixed assets
7,863
10,278
11,288
11,923
Total assets
19,663
25,648
27,261
28,640
Total debts
6,244
3,836
4,461
4,269
Return on equity (%)
NA
4.855
2.923
3.114
Figure 1 : Sales breakdown as at 9M FY2015 (%)
Stocks selected under this section are meant for medium and/or long-term investments. When stocks are recommended under this section, it does not mean that its price will take 1 or 2 years to move. If the price moves too
fast,
i
Capital® may recommend a sell. Or if it is still attractive after holding for a while and its price has gone up, we may still recommend holding or even buying more. Or if it declines,
i
Capital® quotes Warren Buffett who
was supposed to have said this : “If you aren’t prepared to see your stocks go down 50%, you shouldn’t own them. Be prepared for declines – and arrange your financial affairs such that you won’t have to sell out”.
B
| Stock Selections
12
Capital Dynamics Sdn Bhd
The week of 21 January – 27 January 2016
Volume 27 Number 21