SINGAPORE – Private healthcare group IHH Healthcare, which operates four hospitals locally under the Gleneagles, Mount Elizabeth and Parkway brands, is eyeing growth in Singapore and Hong Kong.
The group, which has a portfolio of over 80 hospitals worldwide, is still expanding, announcing its latest deal to acquire Island Hospital in Penang on Sept 4.
Its group chief corporate officer Ashok Pandit told The Straits Times on Sept 11 that the firm’s plans to open 15 new clinics and two Ambulatory Care Centres (ACCs) in Singapore by 2028, and six new clinics or ACCs in Hong Kong within the same timeframe, are on track. ACCs are facilities providing medical procedures that can be done within a day.
The company also intends to increase the capacities of some of its hospitals by almost 4,000 beds by 2028, and is also exploring the possibility of entering new markets such as Indonesia and Vietnam.
“But there are various considerations such as alignment with our overall strategy, market opportunity and regulatory framework to be assessed, before any further decisions can be taken,” Mr Pandit said.
IHH, which is dual-listed in Singapore and Malaysia, recently announced its entry into a sale and purchase agreement to acquire a 100 per cent stake in Island Hospital, a private hospital catering to medical tourists.
The RM4.2 billion (S$1.26 billion) deal includes a 78 per cent stake previously held by private equity firm Affinity Equity Partners, as well as the remaining shares owned by Island Hospital’s senior doctors and its founder and chief executive Mark Wee. The deal is expected to be completed by the end of 2024.
Mr Pandit said IHH chose to expand its operations in Penang because it already has an established presence there with Gleneagles Penang and Pantai Hospital Penang.
“Penang is integral to our strategy for Malaysia with its strong local patient base and appeal to foreign patients, especially from Indonesia, due to its competitive pricing and reputation for clinical and care excellence,” he said.
“What drew us to this asset was that it has robust operations supported by a deep specialist pool – it allows us to extend our leading position in Penang and increase our participation in Malaysia’s medical tourism sector.”
IHH’s last acquisition was also in Malaysia, where its indirect wholly-owned subsidiary Pantai Holdings acquired Timberland Medical Centre in Sarawak for RM245 million.
IHH reported a net profit of RM623 million for the second quarter of its 2024 fiscal year, more than doubling from RM301 million in the previous year, driven by strong operational performance and deferred tax credits, according to its Aug 29 financial statement. Revenue grew by more than 30 per cent to reach RM6.1 billion.
Analysts told ST that there is potential upside to IHH’s share price, even as the acquisition of Island Hospital could dilute the firm’s earnings in the short term.
Mr Isaac Lim, chief market strategist at digital brokerage firm Moomoo, said any short-term dilution in earnings will not materially impact IHH’s profitability, which has seen strong growth over the past three years due to its post-pandemic recovery and strategic expansions.
He said: “From a technical perspective, IHH Healthcare price is now approaching its historical highs of $2.11, last seen in December 2021. Should price see a strong, convincing bullish breakout above this key resistance and psychological level, IHH share price could very well see further upside and push towards $2.33 price level.”
A research analyst at RHB Bank said the bank maintains its “buy” call for IHH, adding: “We see positive synergies from the acquisition considering Island Hospital Penang’s superior margin profile, promising growth prospect, and synergistic value creation in fortifying IHH Penang’s operation.”
Mr Tay Wee Kuang, associate director of research at CGS International Securities, noted that the acquisition of Island Hospital poses limited risk due to IHH’s current exposure, with over 80 hospitals worldwide.
“We continue to like the stock for its diversified geographical exposure that has different catalysts across various countries – a mature market in Singapore, and fast-growing markets across Malaysia, India, Turkey and Eastern Europe,” he said.
Shares of IHH on the Singapore Exchange closed two cents or 1 per cent lower at $2.01 on Sept 12.
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