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PublicInvest Research Results Review Tuesday, June 01, 2021 KDN PP17686/03/2013(032117) IHH HEALTHCARE BERHAD Outperform

DESCRIPTION Strong 1Q Major private healthcare provider with a global network of 30 hospitals, medical centres, clinics and ancillary healthcare IHH’s core net profit reported a strong 77% YoY growth in 1QFY21 to businesses across eight countries. RM335.8m, on the back of stronger operating performance. The results 12-Month Target Price RM6.30 exceeded our and street estimates at 38% and 33% respectively. The Current Price RM5.30 discrepancy in our forecast was predominantly due to lower-than-expected Expected Return 18.9% costs and we attribute this to the Group’s cost optimisation efforts. Given

Market Main the recent movement restrictions imposed in and , we Sector Healthcare expect weaker earnings in the subsequent quarters as operations in these Bursa Code 5225 two markets are likely to be adversely impacted by lower footfall. Bloomberg Ticker IHH MK Shariah-Compliant Yes Therefore, we maintain our earnings forecasts with a <5% tweak due to housekeeping changes. Our TP is subsequently raised to RM6.30, as we SHARE PRICE CHART also roll over our valuation base year to FY22F. Maintain Outperform on

5.90 IHH.

5.70 § Better revenue intensity to offset lower patient volume. IHH 5.50 delivered a Group revenue of RM3.95bn in 1QFY21, implying a 11% 5.30 YoY growth, despite inpatient volume was lower YoY across all of its 5.10 key markets (Singapore: -3% YoY, Malaysia: -30% YoY, : -2% YoY, Acibadem: -2% YoY). The effects of lower patient footfall were 4.90 offset by higher revenue intensity in most of its markets (Malaysia: 4.70 +37.6% YoY, India: +15.2% YoY, Acibadem: +28.7 YoY), with the 4.50 exception of Singapore (-1.7% YoY). Improvement in revenue intensity Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 was a result of IHH undertaking more non-elective procedures that are

52 Week Range (RM) 4.85 – 5.81 higher in value. The increase in Covid-19 related services and 3-Month Average Vol (‘000) 4,546.6 contribution from the newly-acquired Prince Court have helped to cushion the impact from the pandemic. We highlight that Covid-19 SHARE PRICE PERFORMANCE related services accounts for 17%, 10%, 16% and 8% of Singapore’s, Malaysia’s, India’s and Acibadem’s revenue. 1M 3M 6M Absolute Returns -1.5 5.1 -5.0 Relative Returns -0.4 -0.8 -4.7 § Margin expansion due to tight cost control. As a result of the Group’s cost optimization efforts, EBITDA margins have improved by 3.7ppts YoY to 24.3%. EBITDA was also higher by 31% YoY to KEY STOCK DATA RM960.6m. Narrowing losses from Gleneagles (GHK) to

Market Capitalisation (RMm) 46,529.1 RM24.8m (implying a 42% YoY improvement) also contributed to the No. of Shares (m) 8,777.2 stronger EBITDA. Although EBITDA losses have widened on a QoQ basis, however, the target for GHK to breakeven at EBITDA level by FY21 remains on track. MAJOR SHAREHOLDERS

§ Outlook. Given the reinforcement of MCO in Malaysia in May and also % th Mitsui & Co Ltd 32.9 the Heightened Alert that came into effect in Singapore on 16 May, Pulau Memutik Ventures 26.0 we believe that operations in these two markets will be impacted to EPF 9.8 some extent, as patients are expected to defer elective medical procedures, potentially leading to lower patient footfall. With that, we think that IHH could deliver weaker results in 2QFY21.

KEY FORECAST TABLE

FYE Dec 2019A 2020F 2021F 2022F 2023F CAGR (RM m) Revenue 14,912.5 13,404.6 15,697.7 17,778.4 18,981.6 6.2

Operating Profit 1,740.9 1,253.9 1,847.6 1,965.4 1,936.3 2.7 Pre-tax Profit 1,042.7 567.5 1,291.6 1,595.2 1,848.4 15.4 Net Profit 551.5 288.9 936.8 1,147.0 1,319.0 24.4

EPS (Sen) 6.3 3.3 10.7 13.1 15.0 Chua Siu Li P/E (x) 84.3 161.1 49.7 40.6 35.3 T 603 2268 3010 DPS (Sen) 4.0 4.0 6.4 7.8 9.0 F 603 2268 3014 E [email protected] Div. Yield (%) 0.8 0.8 1.2 1.5 1.7 Source: Company, PublicInvest Research estimates 1 Important disclaimer is provided at the end of this report.| PUBLIC INVESTMENT BANK Page 1 of 4

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Table 1: Results Summary QoQ YoY YoY FYE Dec 1Q21 1Q20 4Q20 chg chg YTD 21 YTD 20 chg Comments (RM m) (%) (%) (%) Revenue Parkway 2,786.9 2,492.6 2,692.5 3.5 11.8 2,492.6 2,786.9 11.8 Pantai Acibadem 1,060.5 955.8 969.9 9.3 11.0 955.8 1,060.5 11.0 IMU 59.8 67.3 64.1 (6.7) (11.1) 67.3 59.8 (11.1)

PLife REIT 37.9 37.7 38.8 (2.3) 0.6 37.7 37.9 0.6

Others** 0.6 1.8 0.6 0.3 (64.5) 1.8 0.6 (64.5)

Effects of lower inpatient volume was offset by the better revenue intensity, as Total 3,945.8 3,555.2 3,766.0 4.8 11.0 3,555.2 3,945.8 11.0 most of the cases carried out were complex cases with higher value.

EBITDA

Parkway 640.5 486.6 727.3 (11.9) 31.6 486.6 640.5 31.6 Pantai Acibadem 279.8 217.3 280.2 (0.1) 28.8 217.3 279.8 28.8 IMU 22.4 28.5 12.4 80.6 (21.4) 28.5 22.4 (21.4)

PLife REIT* 89.0 70.4 91.6 (2.8) 26.4 70.4 89.0 26.4

Others** (71.2) (68.4) (69.9) 1.9 4.1 (68.4) (71.2) 4.1

Stronger EBITDA on a YoY basis was due Total 960.5 734.4 1,041.6 (7.8) 30.8 734.4 960.5 30.8 to lower operating costs as well as lower losses from GHK. * Includes rental income earned from lease of hospitals to ** Others comprise mainly IHH Group's corporate office and other investment holding entities.

Source Company, PublicInvest Research

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KEY FINANCIAL DATA

INCOME STATEMENT DATA FYE Dec (RM m) 2019A 2020F 2021F 2022F 2023F Revenue 14,912.5 13,404.6 15,697.7 17,778.4 18,981.6

Operating Profit 1,740.9 1,253.9 1,847.6 1,965.4 1,936.3 Other Gains / (Losses) 205.4 261.2 142.7 165.1 131.1 Finance Costs -903.6 -947.6 -698.7 -535.3 -219.0 Pre-tax Profit 1,042.7 567.5 1,291.6 1,595.2 1,848.4 Income Tax -527.9 -361.7 -452.1 -558.3 -646.9 Effective Tax Rate (%) 50.6 63.7 35.0 35.0 35.0

Minorities 36.6 83.0 97.2 110.1 117.6

Net Profit 551.5 288.9 936.8 1,147.0 1,319.0

Growth Revenue (%) 29.4 -10.1 17.1 13.3 6.8 Operating Profit (%) 12.8 -28.0 47.4 6.4 -1.5 Net Profit (%) -12.1 -47.6 224.3 22.4 15.0 Source: Company, PublicInvest Research estimates

BALANCE SHEET DATA FYE Dec (RM m) 2019A 2020F 2021F 2022F 2023F Property, Plant & Equipment 11,196.3 11,569.5 11,281.3 11,243.1 10,869.9 Goodwill and Intangibles 14,655.9 14,113.5 14,055.6 13,997.7 13,939.8 Cash and Cash Equivalents 4,714.7 4,187.8 4,971.9 3,875.4 6,294.0 Other Assets 14,486.4 14,663.4 15,431.5 16,127.8 16,416.3 Total Assets 45,053.3 44,534.3 45,740.3 45,244.0 47,520.1 Payables 3,858.2 3,891.9 4,395.0 4,974.9 5,357.0 Borrowings 9,025.7 9,683.5 7,332.3 3,000.0 1,500.0 Tax payable 350.4 289.6 289.6 289.6 289.6 Other Liabilities 3,725.0 3,634.0 3,723.0 3,803.7 3,890.5 Total Liabilities 16,959.3 17,498.9 15,739.9 12,068.2 11,037.0 Shareholders’ Equity 28,094.0 27,035.4 30,000.4 33,175.7 36,483.1

Total Equity and Liabilities 45,053.3 44,534.3 45,740.3 45,244.0 47,520.1 Source: Company, PublicInvest Research estimates

PER SHARE DATA & RATIOS FYE Dec 2019A 2020F 2021F 2022F 2023F Book Value Per Share 2.8 2.7 3.1 3.4 3.8 EPS (Sen) 6.3 3.3 10.7 13.1 15.0

DPS (Sen) 4.0 4.0 6.4 7.8 9.0

Payout Ratio (%) 63.6 121.6 60.0 60.0 60.0

ROA (%) 1.1 0.5 1.8 2.3 2.5 ROE (%) 2.3 1.2 3.5 3.8 4.0 Source: Company, PublicInvest Research estimates

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RATING CLASSIFICATION

STOCKS

OUTPERFORM The stock return is expected to exceed a relevant benchmark’s total of 10% or higher over the next 12months.

NEUTRAL The stock return is expected to be within +/- 10% of a relevant benchmark’s return over the next 12 months.

UNDERPERFORM The stock return is expected to be below a relevant benchmark’s return by -10% over the next 12 months.

TRADING BUY The stock return is expected to exceed a relevant benchmark’s return by 5% or higher over the next 3 months but the underlying fundamentals are not strong enough to warrant an Outperform call.

TRADING SELL The stock return is expected to be below a relevant benchmark’s return by -5% or more over the next 3 months.

NOT RATED The stock is not within regular research coverage.

SECTOR

OVERWEIGHT The sector is expected to outperform a relevant benchmark over the next 12 months.

NEUTRAL The sector is expected to perform in line with a relevant benchmark over the next 12 months.

UNDERWEIGHT The sector is expected to underperform a relevant benchmark over the next 12 months.

DISCLAIMER

This document has been prepared solely for information and private circulation only. It is for distribution under such circumstances as may be permitted by applicable law. The information contained herein is prepared from data and sources believed to be reliable at the time of issue of this document. The views/opinions expressed herein are subject to change without notice and solely reflects the personal views of the analyst(s) acting in his/her capacity as employee of Public Investment Bank Berhad (“PIVB”). PIVB does not make any guarantee, representations or warranty neither expressed or implied nor accepts any responsibility or liability as to its fairness liability adequacy, completeness or correctness of any such information and opinion contained herein. No reliance upon such statement or usage by the addressee/anyone shall give rise to any claim/liability for loss of damage against PIVB, , its affiliates and related companies, directors, officers, connected persons/employees, associates or agents.

This document is not and should not be construed or considered as an offer, recommendation, invitation or a solicitation of an offer to purchase or subscribe or sell any securities, related investments or financial instruments. Any recommendation in this document does not have regards to the specific investment objectives, financial situation, risk profile and particular needs of any specific persons who receive it. We encourage the addressee of this document to independently evaluate the merits of the information contained herein, consider their own investment objectives, financial situation, particular needs, risks and legal profiles, seek the advice of their, amongst others, tax, accounting, legal, business professionals and financial advisers before participating in any transaction in respect of any of the securities of the company(ies) covered in this document.

PIVB, Public Bank Berhad, our affiliates and related companies, directors, officers, connected persons/employees, associates or agents may own or have positions in the securities of the company(ies) covered in this document or any securities related thereto and may from time to time add or dispose of, or may be materially interested in, any such securities. Further PIVB, Public Bank Berhad, our affiliates and related companies, associates or agents do and/or seek to do business with the company(ies) covered in this document and may from time to time act as market maker or have assumed an underwriting commitment in the securities of such company(ies), may sell them or buy them from customers on a principal basis, may have or intend to accommodate credit facilities or other banking services and may also perform or seek to perform investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment advisory or other services from any entity mentioned in this document. The analyst(s) and associate analyst(s) principally responsible for the preparation of this document may participate in the solicitation of businesses described aforesaid and would receive compensation based upon various factors, including the quality of research, investor client feedback, stock pickings and performance of his/her recommendation and competitive factors. The analyst(s) and associate analyst(s) may also receive compensation or benefit (including gift and company/issuer-sponsored and paid trips in line with the Bank’s policies) in executing his/her duties. Hence, the addressee or any persons reviewing this document should be aware of the foregoing, amongst others, may give rise to real or potential conflicts of interest.

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