Despite softer industry-wide numbers, Rachel Tan of DBS Group Research has maintained her "buy" call on IHH Healthcare Q0F , indicating this counter as more preferable over the less diversified Raffles Medical Group BSL , which has warranted a "hold" call.
In her April 12 note, Tan points out that IHH Healthcare is likely to see softer 1HFY2024 ending June numbers, as the local healthcare industry to normal growth rates following the easing of shortage of hospital beds, with demand easing following the pandemic and new capacity added.
According to Tan, private hospitals showed moderating revenue in 2HFY2023 as public hospitals’ occupancy also eased, and ebitda margin was pressured due to higher costs.
"While it could be a little early to conclude that the easing is permanent, we believe that private hospitals will likely see a slower start to FY2024, especially in 1QFY2024, both due to moderation in public hospitals as well as the festive season," says Tan.
As such, she believes IHH is seeing a normalisation of its earnings post-pandemic.
Earnings for the healthcare giant, with operations across Singapore, Malaysia and many more markets, will see growth resuming at "normal" rates locally this current FY2024.
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In addition, IHH can expect a lift from the likes of Gleneagles in Hong Kong, which is seen to achieve a positive contribution to the bottom line.
"With new management in place and IHH embarking on a new growth plan, we are optimistic that it will be able to drive a growth trajectory moving forward," says Tan.
Her target price for IHH is $2.18 and RM7.60 respectively for the counter quoted on both the Singapore and Kuala Lumpur exchanges.
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She notes that IHH is now trading at below 13x FY24F EV/EBITDA, which is below -0.5SD of its historical mean and close to troughs seen during the pandemic months.
"This is an attractive level to ride on its medium-term growth trajectory," says Tan.
IHH Healthcare shares last changed hands at $1.72.
