A commendable FY21
Maintain BUY
IHH ended FY21 on a strong note, with 4Q21 earnings up 33%, while full year results exceeded our/consensus expectations by 7%. We believe the recovery of patient volumes should drive the growth ahead, notwithstanding the potential moderating of revenue intensity and Covid19 related revenues. The recent share price weakness is unwarranted in our view, and at 31x FY22E PE, the stock is trading at more than 1SD below its 5Y mean. Maintain BUY with a higher SOP-derived TP of RM7.60.
Ending on a strong note
4Q21 core PATMI was up 33% YoY to RM441m, mainly on the back of 1) higher patient volumes across most of its key markets, 2) higher revenue intensity due to higher mix of complex cases, and 3) sustained Covid-19 related revenues due to the Omicron wave. Full-year earnings were up 127% to RM1.58bn and were ahead of both our and consensus estimates by 7%. The group also declared a 6 sen DPS for FY21 (33% payout of core PATMI).
Key operational metrics remained encouraging
On a full-year basis, patient volumes grew by 18% for both India and Acibadem due to faster economic reopening. It was however flattish for Singapore and a slight decline of 4% for Malaysia. Nonetheless, revenue intensity grew by 8-21% across the key markets due to higher mix of complex cases, although we saw some tapering towards the 2H21 as patient mix began to normalise. Covid-19 related revenues remained a strong contributor at 6-29% of 4Q21 revenues in the key markets. The consolidation of several hospitals also fuelled FY21 revenue growth, though the group incurred higher staff and Covid-19 related costs.
Volume recovery-led growth ahead
We tweak our FY22-23E earnings higher by 2-3% to account for sustained elevated revenue intensity and Covid-19 related revenues, given the 2H21 metrics did not decline as badly as expected. We however impute a lower TRY/MYR average of 0.40 from 0.46 to reflect the weakening Lira. We also introduce FY24E estimates. Our bullish stance on the stock remains unchanged as IHH should benefit from recovering patient volumes as international borders begin to reopen. Recent share price weakness is unwarranted in our view. At 31x FY22E PE, the stock is trading at more than 1SD below its 5Y mean of 44x.