DBS Group Research has raised its target price for IHH Healthcare Q0F following it latest earnings that suggest the multi-market provider of healthcare services is poised for further growth.
For its 9MFY2024 ended Sept, IHH recorded patmi of RM1.7 billion, up 21% y-o-y.
"The growth in the group’s core hospital and healthcare segment was attributed to sustained demand for healthcare services, higher revenue intensity, and inflation-adjusted price adjustments," state analysts Amanda Tan and Andy Sim in their Dec 2 note.
Besides growth generated from its existing hospitals and clinics, IHH has recently acquired Island Hospital in Penang.
The addition of this 600-bed hospital for RM3.9 billion is seen to help boost its market position in Malaysia and help derive synergies of more than RM200 million over the next five years, says DBS.
In Singapore, another key market, its flagship Mount Elizabeth Orchard hospital is on track to complete the bulk of an extensive renovation by 3QFY2025. By then, its ebitda margins should trend back to normalised levels of around 29%, suggests the DBS analysts.
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Taking into account new contributions from Island Hospital, as well as inflation in Turkey, where IHH operates a chain of hospitals too, plus a lower tax rate, the DBS analysts have raised their FY2024 and FY2025 earnings estimates by 66% and 47% respectively.
Their new target price for IHH's KL-quoted shares is RM8.50, up from RM7.60; for the Singapore-quoted shares, $2.58, up from $2.18.
"While there might be some profit-taking after the strong run-up following the announcement of the Island Hospital acquisition, we believe that investors who take a longer-term view on the counter could accumulate on dips.
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"IHH’s expansion plans amidst favourable industry trends, such as an ageing population, increased prevalence of lifestyle diseases, increasing affluence, and medical advancements, make it well positioned for growth," add Tan and Sim.
IHH Healthcare shares changed hands at $2.19 as at 9.36 am.
