IHH Healthcare faces expansion headwind
Malaysia-based IHH Healthcare, Asia’s largest hospital operator, has posted moderate results for the first quarter of 2013 on May 23, leaving analysts wondering if cost pressure for future hospital expansion could reduce profitability further.
IHH Healthcare Bhd’s earnings rose just 3.6 per cent to RM127.27 million in the first quarter ended March 31, 2013 over the same quarter in 2012. The group’s profit after tax and minority interests increased by 3 per cent year-on-year to RM113.7 million. If “exceptional items” were excluded, it increased by 18 per cent year-on-year to RM119.9 million, the company said, indicating that start-up costs for new hospitals and financing costs have left a trace in the balance sheet.
Revenue increased to RM1.62 billion from RM1.26 billion in the same period in 2012. However, pre-tax profit declined to RM213.588 million for the first quarter from RM218.248 million.
Analysts say that although core earnings before tax came in within expectations, its core net earnings came not.
Kuala Lumpur-based Alliance Research said that the below expectation core earnings were mainly dragged by higher depreciation charge and interest expenses, lower than expected contribution from the group’s associates and higher share of profit by minority interests.
Higher finance costs and start-up losses of new hospitals could put a drag on the share price of IHH Healthcare as it strives to expand in the next few years, prompting Alliance Research to maintain its “Sell” recommendation for the stock.
Amresearch said that IHH Healthcare was expected to continue its efforts to intensify revenue and exposure in its three key markets, Malaysia, Singapore and Turkey, to propel growth further underpinned by strong franchise value, and also through its Hong Kong operations.
Kenanga research has maintained its “market perform” call on the stock and raised the target price to RM4.04 from RM3.51.
IHH Healthcare raised $2 billion in an initial public offering (IPO) at the Bursa Malaysia in July 2012, which was the third largest IPO globally at that time. The stock jumped as much as 14 per cent in the trading debut from the IPO price of RM2.80. As of May 27, the stock traded at around RM3.92.
Malaysia-based IHH Healthcare, Asia's largest hospital operator, has posted moderate results for the first quarter of 2013 on May 23, leaving analysts wondering if cost pressure for future hospital expansion could reduce profitability further. IHH Healthcare Bhd's earnings rose just 3.6 per cent to RM127.27 million in the first quarter ended March 31, 2013 over the same quarter in 2012. The group's profit after tax and minority interests increased by 3 per cent year-on-year to RM113.7 million. If "exceptional items" were excluded, it increased by 18 per cent year-on-year to RM119.9 million, the company said, indicating that start-up costs for...
Malaysia-based IHH Healthcare, Asia’s largest hospital operator, has posted moderate results for the first quarter of 2013 on May 23, leaving analysts wondering if cost pressure for future hospital expansion could reduce profitability further.
IHH Healthcare Bhd’s earnings rose just 3.6 per cent to RM127.27 million in the first quarter ended March 31, 2013 over the same quarter in 2012. The group’s profit after tax and minority interests increased by 3 per cent year-on-year to RM113.7 million. If “exceptional items” were excluded, it increased by 18 per cent year-on-year to RM119.9 million, the company said, indicating that start-up costs for new hospitals and financing costs have left a trace in the balance sheet.
Revenue increased to RM1.62 billion from RM1.26 billion in the same period in 2012. However, pre-tax profit declined to RM213.588 million for the first quarter from RM218.248 million.
Analysts say that although core earnings before tax came in within expectations, its core net earnings came not.
Kuala Lumpur-based Alliance Research said that the below expectation core earnings were mainly dragged by higher depreciation charge and interest expenses, lower than expected contribution from the group’s associates and higher share of profit by minority interests.
Higher finance costs and start-up losses of new hospitals could put a drag on the share price of IHH Healthcare as it strives to expand in the next few years, prompting Alliance Research to maintain its “Sell” recommendation for the stock.
Amresearch said that IHH Healthcare was expected to continue its efforts to intensify revenue and exposure in its three key markets, Malaysia, Singapore and Turkey, to propel growth further underpinned by strong franchise value, and also through its Hong Kong operations.
Kenanga research has maintained its “market perform” call on the stock and raised the target price to RM4.04 from RM3.51.
IHH Healthcare raised $2 billion in an initial public offering (IPO) at the Bursa Malaysia in July 2012, which was the third largest IPO globally at that time. The stock jumped as much as 14 per cent in the trading debut from the IPO price of RM2.80. As of May 27, the stock traded at around RM3.92.
