KUALA LUMPUR: IHH Healthcare Bhd’s shares on Bursa Malaysia was down this morning despite news of its maiden foray into Sarawak.
At 10.35 am, the healthcare provider shed three sen to RM5.97 after 230,500 shares changed hands.
Yesterday, IHH Healthcare announced that its indirect wholly owned subsidiary Pantai Holdings Sdn Bhd, will acquire 100 per cent of Bedrock Healthcare Sdn Bhd which owns Timberland Medical Centre (TMC) in the Land of Hornbills for RM245 million cash.
The deal, expected to be completed by the first half of 2024 (1H 2024), is subject to regulatory approval.
RHB Investment Bank Bhd said in a note that should the deal succeed, this would strengthen IHH Healthcare’s footing in Sabah and Sarawak as currently it only operates a 121-bed Gleneagles in Kota Kinabalu.
TMC offers a wide range of medical and surgical services including cardiology, nephrology, oncology, gastroenterology, geriatrics care, orthopaedic surgery, hepatology surgery, orthopaedic and urology.
The investment bank said the consolidation of TMC could potentially yield a 2.0 per cent upside to IHH Healthcare’s Malaysia 2024 forecast earnings before interest, taxes, depreciation and amortisation (EBITDA).
“Although the earnings accretion does not seem material in the near term, management sees potential synergies on achieving better operating efficiency with TMC going forward.
“We also do not rule out the possibility that TMC will serve as a medical centre to attract medical tourists given its close proximity to the Kuching International Airport, aside from being surrounded by several three- to four-star hotels,” it said.
RHB Investment Bank has maintained its ‘buy’ recommendation on IHH Healthcare with a target price (TP) of RM6.80 per share.
“We expect IHH Healthcare’s near-term growth to be pivoted by inelastic consumer demand for healthcare services, a pickup in health tourism, along with its announced 2,000-bed expansion plan which should continue to offer opportunities to strengthen its regional footprint given the current bed occupancy rate is nearing the optimal level,” it said.
Meanwhile, Kenanga Investment Bank Bhd said that driven by procurement synergies and cost efficiency under the cluster strategy, the EBITDA margin from TMC is expected to be above 20 per cent.
“The acquisition will marginally increase IHH Healthcare’s net debt and net gearing of RM4.5 billion and 0.16 times as at March 31, 2023 to RM4.7 billion and 0.17 times,” it said.
The company has kept its ‘Outperform’ call in IHH Healthcare with a TP of RM7.00 per share. – BERNAMA
