• Maintain BUY (TP: RM7.17). IHH’s FY23 top-line improved by +16.4% YoY to RM20,935mn. The better performance was supported by strong revenue growth from across key markets (Singapore: +13% YoY, Malaysia: +20% YoY, India: +12% YoY, Greater China: +31% YoY Turkiye & Europe: +33% YoY). Nonetheless, IHH recorded lower FY23 core net profit of RM1,279mn (-7.3% YoY) which was below our and consensus expectations, accounting for 84% and 77% respectively. The deviation against our projection was primarily due to higher-than-expected depreciation and amortisation. Maintain a BUY call with lower TP of RM7.17 (from RM7.18). Our valuation is derived based on SOP valuation with a WACC of 7% for Parkway Pantai Limited, 11% for Acibadem.

• Key highlights. In 4Q23, IHH's revenue increased by 9.0% YoY, attributed to a stronger performance across its key markets. Notably, the Hospital and Healthcare segment saw a 13.0% YoY revenue growth, reaching RM5.2bn. This growth was primarily fuelled by a robust recovery in core non-COVID- 19 revenues, with both local and international patients returning for treatment. Concurrently, the group's net profit soared by over 100%. However, the IHH’s 4Q23 core net profit declined by -22.0% to RM265.5mn due to recognised foreign exchange losses and higher net finance costs.

• Earnings Revision. We revised our FY24-FY26F earnings forecast lower by - 9.0%/-6.4%/-6.5% respectively, to a net profit of RM1.6bn/RM1.8bn/ RM2.0bn (Table 2), as we revised our depreciation & amortisation assumptions.

• Outlook. We believe that IHH's core operations in Malaysia and Singapore have considerable capacity to fill beds and increase hospital occupancy as local patients resume elective treatments. This favourable trend is anticipated to be reinforced by the return of foreign patients, leading to a resurgence in medical tourism. Expecting notable growth in IHH's health tourism segment in FY24, we predict a rise in foreign visitors. Additionally, we are optimistic about IHH's organic expansion plan, noting that the group has outlined adding close to 4,000 beds by 2028.

Source: BIMB Securities Research - 1 Mar 2024