IHH Healthcare - CGS-CIMB Research 2022-09-09: No Deal For Ramsay-Sime Darby

IHH Healthcare - No Deal For Ramsay-Sime Darby

  • IHH Healthcare announced the termination of discussions in relation to its proposed RM5.67bn acquisition of Ramsay-Sime Darby Health Care (RSD). RSD’s portfolio of 7 hospitals (4 in Malaysia, 3 in Indonesia) would have added more than 1,500 hospital beds to IHH Healthcare’s end-FY21 bed count of 11,418 beds across key operating markets (i.e. Malaysia, Singapore, India, Turkey and Europe) and gained it entry into a new market – Indonesia.
  • We think IHH Healthcare is exercising prudence in i ts capital use, especially given the rising interest rate environment which may make the earning s accretion from the acquisition less attractive. We do not foresee any downside risk to IHH Healthcare’s earnings with the deal falling through as we have not included contribution from the potential deal in our earnings forecasts.
  • IHH Healthcare remains on the lookout for potential growth, especially with its disposal of International Medical University (IMU) announced in 2Q22 that IHH Healthcare expects to be completed by 1Q23F. The sale will free up RM1.35bn in capital for IHH Healthcare.
  • Even without the RSD deal, IHH Healthcare will be boosting its bed capacity with its acquisition of Ortopedia Hospital in Adana, Turkey, and the opening of a new floor at Fortis Hospital, Mulund in India. We think that such bolt-on acquisitions and organic expansion plans through the opening of new hospital wings to increase bed capacity could yield better results compared to larger acquisitions or greenfield projects that would have higher integ ration costs and long gestation periods, respectively.
  • The recent COVID-19 lockdown in Chengdu may spark concerns over the impact on IHH Healthcare’s Chengdu Gleneagles Hospital. However, given that this hospital’s operations had been impacted by the pandemic since its opening in late-2019, we see minimal impact to the group’s earnings.
  • Meanwhile in Hong Kong, where private hospitals can accept COVID-19 patients for treatments, IHH Healthcare’s Gleneagles Hong Kong has seen improving EBITDA contribution and management has guided for total operational beds to reach 300 by end-FY22. We believe IHH Healthcare operates about 200-250 beds in Glenagles Hong Kong currently.
  • Maintain ADD recommendation on IHH Healthcare with unchanged target price of RM8.07

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.

TAY Wee Kuang CGS-CIMB Research | https://www.cgs-cimb.com 2022-09-09
SGX Stock Analyst Report ADD MAINTAIN ADD 2.510 SAME 2.510

Previous report by CGS-CIMB:
2022-08-29 IHH Healthcare - Operational Resilience With Room For Growth

Target prices by 3 other brokers at IHH Healthcare Target Prices.
Listing of broker reports at IHH Healthcare Analyst Report.

Relevant links:
IHH Healthcare Share Price History,
IHH Healthcare Announcements,
IHH Healthcare Dividends & Corp Actions,
IHH Healthcare News Articles


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