Robust top line growth expected for IHH
PETALING JAYA: IHH Healthcare Bhd ’s revenue growth will likely outpace its capacity growth this year, amid high demand from foreign patients across its operations in Malaysia, Turkiye and Europe.

The healthcare services provider, which is expected to add 570 beds in Malaysia, India and Hong Kong in 2024, is expected to register a revenue growth of 13.5% year-on-year in 2024, according to CGS International (CGSI) Research.

“In its latest analyst briefing held on March 1, the management said it is targeting to add about 570 beds across Malaysia, India and Hong Kong in 2024, suggesting that capacity expansion should only pick up from 2025,” the brokerage said.

It noted that IHH’s management had previously indicated that the group was looking to add 4,000 beds organically to increase its total bed capacity by more than 30% from around 12,300 as of end-2023.

“Nevertheless, our revenue growth forecast of 13.5% year-on-year in 2024 outpaces IHH’s estimated capacity expansion of around 4.6% due to higher revenue intensity assumptions amid an increase in contribution from foreign patients across Malaysia, Turkiye and Europe, as well as an increase in ambulatory care centres in Singapore and Hong Kong.

“This will allow IHH to better utilise its bed capacity across hospitals by decanting lower revenue-intensive activities into these facilities,” it added.

CGSI Research raised its target price for IHH to RM7.88 from RM7.70 previously and reiterated its “add” recommendation on the counter. It said it liked IHH for the different levers of growth available to the company across its operating regions.

The brokerage lowered its 2024 earnings per share forecast for IHH by 0.8%, but increased it for 2025 by 1.9%, after raising its revenue forecasts and incorporating lower margins.

IHH’s revenue rose to a record RM20.93bil in 2023, up from RM17.99bil in 2022, while net profit rose to RM2.95bil from RM1.55bil.

IHH observed year-on-year (y-o-y) revenue growth in the fourth quarter of 2023 (4Q23) across key regions of operations for its hospital services business, that is, Malaysia: (13% y-o-y), Singapore: (11% y-o-y), India (8% y-o-y), as well as Turkiye and Europe (17% y-o-y).

“Malaysia, Turkiye and Europe saw higher inpatient admissions, driven by higher demand from foreign patients.

“Management shared that foreign patient revenue had grown around 130% y-o-y in Malaysia for 2023, to around 6% of total revenue from Malaysia,” CGSI Research said.

“Foreign patients to Turkiye formed 18% of total revenue from Turkiye and Europe in 4Q23 and 2023 alike, while its European operations formed 30% of its revenue from the region, bringing non-lira contribution to revenue for the region to 48% from around 40% in 2022,” it added.

Further, Singapore and India saw higher revenue intensity with more complex treatments undertaken, CGSI Research said.

With the exception of India, there was a slight decline in earnings before interest, tax, depreciation and amortisation margins y-o-y in 4Q23, due to higher staff costs as IHH stepped up hiring efforts to address issues of nursing shortage across its hospitals.
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IHH Healthcare Bhd’s revenue growth will likely outpace its capacity growth this year, amid high demand from foreign patients across its operations in Malaysia, Turkiye and Europe.