Mala

ysia Company Guide

IHH Healthcare
Version 14 | Bloomberg: IHH MK; IHH SP | Reuters: IHHH.KL; IHHH.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 2 Mar 2020

BUY A sneeze, not the flu

Last Traded Price ( 28 Feb 2020): RM5.70 (KLCI : 1,482.64)
Price Target 12-mth : RM6.40 (12% upside)
Last Traded Price ( 28 Feb 2020): S$1.87 (STI : 3,011.08)
Price Target 12-mth : S$2.13 (14% upside)
Analyst
Rachel TAN +65 6682 3713 racheltanlr@dbs.com
Andy SIM, CFA +65 6682 3718 andysim@dbs.com
What’s New
• FY19 core net profit fell -10% y-o-y; revenue and
EBITDA rose 34% y-o-y and 23% y-o-y on constant
currency
• Gleneagles Chengdu opened in October 2019;
obtained Yibao approval
• Gleneagles Shanghai’s opening delayed until COVID-19
outbreak stabilises
• Declared FY19 dividend of 4 Scts
Price Relative
Maintain BUY, TP of RM6.40. We maintain our BUY rating on
IHH Healthcare (IHH) and target price (TP) of RM6.40. We
remain positive on IHH’s growth plans, with a pipeline of new
hospitals in China and potential escalation in expansion
momentum in India despite near-term headwinds and gestation
period. Trading 1 standard deviation (SD) below of its historical
average, we believe potential headwinds are priced in.
Where we differ. Tapping into 2 largest economies in Asia with
the highest growth potential with platforms in China and India.
IHH’s medium-term outlook is bright while it rides out its near-
term headwinds and gestation period for the new hospitals. In
addition, with a potential strong platform in India and another
in China, IHH now has exposure to the two largest economies in
Asia with the highest growth potential in the healthcare sector.
We believe this further elevates IHH’s long-term potential.
Potential catalysts: Shorter gestation period for new hospitals,
organic growth and new brownfield or greenfield hospitals.
FY19 results impacted by impairment loss and reversal of
deferred tax assets. IHH posted FY19 headline net profit of
RM552m (vs RM628m in FY18) largely due to impairment loss
and reversal of deferred tax assets. Core profit fell 10% y-o-y.
Key result highlights: i) non-Turkish Lira (TRY) debt reduced to
EUR226m, ii) Gleneagles Chengdu opened in October 2019 and
obtained Yibao approval, iii) Gleneagles Shanghai to open when
COVID-19 situation stabilises.

Forecasts and Valuation Valuation:

FY Dec (RMm) 2018A 2019A 2020F 2021F We maintain our BUY rating and TP of RM6.40, based on sum-
Revenue 11,521 14,912 15,500 16,546 of-parts (SOP) valuation methodology. The stock is trading at
EBITDA 2,496 3,170 3,407 3,692
Pre-tax Profit 752 1,043 1,430 1,629
18x FY19F enterprise value (EV)/ earnings before interest, tax,
Net Profit 628 551 963 1,048 depreciation and amortisation (EBTIDA), 1SD standard
Net Pft (Pre Ex.) 628 551 963 1,048 deviation below its historical average
Net Pft Gth (Pre-ex) (%) 51.1 (12.1) 74.7 8.8
EPS (sen) 7.57 6.29 11.0 12.0
EPS Pre Ex. (sen) 7.57 6.29 11.0 12.0 Key Risks to Our View:
EPS Gth Pre Ex (%) 50 (17) 75 9 i) Economic slowdown; ii) weaker-than-expected performance,
Diluted EPS (sen) 6.53 5.29 9.98 11.0 especially in new markets; iii) government policy changes; iv)
Net DPS (sen) 3.00 4.00 4.00 4.00
BV Per Share (sen) 265 255 261 268
acquisitions that may moderate near-term earnings growth.
PE (X) 75.3 90.7 51.9 47.7
PE Pre Ex. (X) 75.3 90.7 51.9 47.7 At A Glance
P/Cash Flow (X) 25.5 20.4 16.6 19.0 Issued Capital (m shrs) 8,774
EV/EBITDA (X) 22.7 18.9 17.1 15.3 Mkt. Cap (RMm/US$m) 50,012 / 11,869
Net Div Yield (%) 0.5 0.7 0.7 0.7 Major Shareholders (%)
P/Book Value (X) 2.1 2.2 2.2 2.1
Net Debt/Equity (X) 0.1 0.2 0.1 0.0 Mitsui & Co 32.9
ROAE (%) 2.9 2.5 4.3 4.5 PULAU Memutik Ven Sdn Bhd 26.0
Central Depository Pte Ltd 7.5
Earnings Rev (%): (6) (10)
Consensus EPS (sen): 13.0 15.8 Free Float (%) 21.9
Other Broker Recs: B: 14 S: 1 H: 6 3m Avg. Daily Val (US$m) 5.6
Source of all data on this page: Company, DBS Bank, GIC Industry : Health Care / Health Care Equipment & Services
Bloomberg Finance L.P.

ed: JS, sa: YM, PY, CS

Company Guide
IHH Healthcare
WHAT’S NEW
A sneeze, not the flu
FY19 results impacted by impairment loss and reversal of
deferred tax assets.
IHH FY19 recorded headline net profit of RM552m (vs
RM628m in FY18). This was below our estimates, mainly due
to impairment loss of RM200m on Global Hospital, India
recognised in 4Q19 and RM67.2m reversal of deferred tax
assets. The higher net profit was largely due to; i) lower
foreign exchange (forex) translation losses partly from TRY
that stabilised in 9M19 from a sharp depreciation in 3Q18, ii)
partly from forex translation gains following the successful
restructuring of non-TRY debt to only c.US$250m, iii) offset by
higher interest expenses (estimated to have more than
doubled) from higher borrowings to acquire Fortis Healthcare.
Excluding exceptional items, core profits fell -10% y-o-y to
RM921m mainly due to; i) higher net interest expenses, ii)
higher depreciation (+18% y-o-y ex-Malaysian Financial
Reporting Standard 16 (MFRS16), iii) Fortis’ tax expense
increased by RM67.2m mainly due to reversal of deferred tax
assets in YTD19, iv) forex losses and fair value exchange losses
on forward exchange contracts compared to gains recognised
in FY18. These were partially mitigated by one-off items
including reversal of RM21.8m accrued interest on prior years’
tax payable and RM28.5m of trustee management fee income
from disposal of RHT asset.
FY19 revenue rose +29% y-o-y to RM15b with growth mainly
from Fortis. Excluding Fortis, revenue increased +6% y-o-y
from all key markets; Singapore (+10% y-o-y), Malaysia
(+15% y-o-y), North Asia (+21% y-o-y largely from Gleneagles
HK), and Turkey (+2% y-o-y). On constant currency basis,
FY19 revenue jumped +34% y-o-y.
FY19 EBITDA rose +34% y-o-y to RM3.3bn, in line with our
and consensus estimates, mainly on good underlying
operational performance, contributions from Fortis and impact
of MFRS 16 adjustments. EBITDA growth was largely from
Singapore (+29% y-o-y), Malaysia (+17% y-o-y), Turkey
(+38% y-o-y) and reduced losses from Gleneagles HK (-12%
y-o-y), partially offset by start-up losses from Gleneagles
Chengdu, estimated at c.RM42.5m. On constant currency
basis and ex-MFRS16 impact, EBITDA rose +23% y-o-y.
IHH’s 4Q19 headline net profit fell to RM41m (vs RM509m in
4Q18) mainly from forex translation gains recorded in 4Q18
on TRY rebound and impairment loss of Global Hospital. Core
profits fell 15% y-o-y on higher financing costs (+12% y-o-y),
Fortis’ reversal of deferred tax assets and forex and fair value
forex losses (vs forex gains in 4Q19).
4Q19 revenue and EBITDA increased +21% y-o-y and 25% y-
o-y respectively; constant currency (ex-MFRS 16) revenue and
EBITDA rose +22% y-o-y and 13% y-o-y respectively.
4Q19 EBITDA margins (ex-PLife REIT) improved by 1.3p.p q-o-
q to 22.9% (vs 21.6% in 3Q19). EBITDA margins (ex-MFRS
16) fell by 1.6p.p q-o-q to 20% from 21.5% in FY19. EBITDA
margins (ex-new hospitals; ex- PLife REIT) improved q-o-q to
29% (vs 26% in 3Q19 and 26% in 4Q18). The improved
EBITDA margins were mainly led by Singapore and Turkey.
IHH declared higher FY19 final dividend of 4Scts (vs 3Scts in
FY18).
Key operational highlights
• Gleneagles HK occupancy dipped to 50% (vs 58% in
3Q19) with impact from HK demonstrations.
• 3 key markets continue to deliver growth.
• Gleneagles Chengdu obtained Yibao approvals;
Gleneagles Shanghai opening likely to be delayed due to
COVID-19.
• New 3-prong strategy from new CEO – i) cluster strategy
in metro areas, ii) review of portfolio of assets including
divestments and a focus to improve capital returns, iii)
cost savings.
Gleneagles HK EBITDA losses widened on additional staff
ramp-up; occupancy fell to 50%; COVID-19 and HK
demonstration led to delays in non-essential procedures.
Gleneagles HK EBITDA losses increased q-o-q to RM49.4m (vs
RM39.4m in 3Q19) and RM34.5m in 2Q19 (RM39.4m in
4Q18) mainly due to additional staff to ramp up its clinical
services. Occupancy fell to 50% on 150 operational beds vs
58% in 3Q19 and above 60% previously (62% in 2Q19 and
68% in 1Q19). HK demonstrations and the COVID-19
outbreak have partly impacted non-urgent and non-essential
procedures and services.
Singapore – continues to deliver good growth. In 4Q19 and
FY19, revenue from IHH’s Singapore operations grew 8% and
10% y-o-y respectively. Both APRIA and inpatient volumes
continued to grow moderately at 4.3% y-o-y and 1.6% y-o-y
in 4Q19. On a constant currency basis, revenue and EBITDA
grew 8% y-o-y and 32% y-o-y respectively while EBITDA
margins improved by 5.4p.p. q-o-q partly from the impact of
MFRS-16. Foreign patients, comprising 25% of 4Q19
Singapore revenue, was stable q-o-q (vs 26% in 2Q19 and
23% in FY18).
Page 2
Company Guide
IHH Healthcare
Malaysia – continues to see growth in Indonesian patients.
4Q19 and FY19 revenue from IHH’s Malaysia operations grew
12% and 15% y-o-y led by higher inpatient volumes (+3.2%
y-o-y) and average revenue per inpatient admission (ARPIA)
(+7.7% y-o-y). Foreign patients from Indonesia continued to
rise. EBITDA margins fell to 27.6% (vs 29.3% in 3Q19, 29.8%
in 3Q18).
Acibadem – strong performance led by price adjustments and
foreign patients; non-TRY debt stood at EUR226m as at
December 2019. On a constant currency basis, Acibadem’s
4Q19 and FY19 revenue grew 11% y-o-y and 17% y-o-y
respectively while, EBITDA (ex-MFRS 16) grew 23% y-o-y and
30% respectively. The strong growth was partially led by
strong growth in ARPIA of 5.4% y-o-y in 4Q19 while inpatient
volume was flattish (+0.5%) (mainly due to lower local
patients at non-Istanbul hospitals).
Post restructuring / refinancing, IHH’s management has
successfully reduced its non-TRY debt to US$226m as at
December 2019. This will substantially reduce its exposure to
forex translation volatility.
India – Fortis’ EBITDA -28% q-o-q; existing India hospitals
EBITDA almost halved q-o-q. 4Q19 and FY19 revenue were
RM816m and RM3.3b (vs RM357m and RM851m in 4Q18
and FY18 respectively) on maiden contribution from Fortis.
Fortis’ EBITDA fell 28% q-o-q. India (ex-Fortis) has turned
EBITDA positive since 3Q19 after 3 quarters of consecutive
losses as it converts to a more multi-disciplinary focused
hospital to reduce concentration risks on a single doctor.
However, on a q-o-q basis, India (ex-Fortis) almost halved,
albeit marginal.
Latest update on the suo moto notice served by The Supreme
Court to Fortis Healthcare - the next court hearing is on 16
March.
China – Gleneagles Chengdu obtained approval for Yibao in
December 2019. Gleneagles Chengdu which opened in
October 2019 is now operating with 30 beds and 25 doctors.
The hospital obtained approval for Yibao in December 2019
and will continue to drive the ramp-up from various channels,
ie, corporates, insurance, yibao and private.
Impact of COVID-19. Following the outbreak of COVID-19,
IHH’s management expects more delays in non-essential
procedures and slower foreign patient volume, especially from
China. IHH is expecting COVID-19 to have a bigger impact on
hospitals in Asia compared to Turkey. In addition, the
construction of Gleneagles Shanghai has been halted
following COVID-19. The opening of Gleneagles Shanghai is
expected to be delayed until the situation in Shanghai
stabilises.
New CEO, new strategy. IHH’s new chief executive officer
(CEO) shared his new 3-prong strategy; i) pursue
geographical clusters in metro areas to achieve greater
economies of scale; ii) review portfolio which includes
divestments of under-performing assets outside of its focus
clusters to priorities returns, iii) leverage international scale to
achieve global synergies and drive cost savings.
Maintain BUY, TP of RM6.40. We maintain our BUY rating
and TP of RM6.40. We trim our FY20F/21F estimates by 6% to
10% to factor some COVID-19 impact and higher gestation
losses from Gleneagles HK.
IHH currently trades at 17x FY20F enterprise value
(EV)/EBITDA, close to 1SD below its historical average. We
remain positive on IHH’s long-term growth plans, with a
pipeline of new hospitals in China and a potential escalation
of expansion into India. We believe the ramp-up in Gleneagles
HK and better economic prospects in home countries such as
Malaysia and Singapore could offset some of the start-up
losses in China and lead IHH into its next phase of growth.
IHH’s medium-term outlook is bright while it rides out its near-
term headwinds and gestation period for the new hospitals. In
addition, with a potential strong platform in India and another
in China, IHH now has exposure to the two largest economies
in Asia with the highest growth potential in the healthcare
sector. We believe this further elevates IHH’s long-term
potential.
The key catalysts are: i) Gleneagles HK to turn EBITDA
positive and shorter-than-expected gestation period from
other new hospitals, ii) better-than-expected organic
performance, iii) turnaround in Turkey, iii) positive
developments in new markets such as India.
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Company Guide

IHH Healthcare

Quarterly / Interim Income Statement (RMm)

FY Dec 4Q2018 3Q2019 4Q2019 % chg yoy % chg qoq

Revenue 3,165 3,788 3,836 21.2 1.3

Other Oper. (Exp)/Inc (2,731) (3,292) (3,515) 28.7 6.8
Operating Profit 435 496 322 (26.0) (35.2)
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - -
Associates & JV Inc 10.2 4.13 89.3 777.4 2,059.0
Net Interest (Exp)/Inc 368 (106) (215) nm (102.3)
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Pre-tax Profit 813 394 196 (75.9) (50.4)
Tax (102) (112) (156) 52.4 38.5
Minority Interest (201) (45.5) 0.61 nm Nm
Net Profit 509 236 40.6 (92.0) (82.8)
Net profit bef Except. 509 236 40.6 (92.0) (82.8)
EBITDA 703 836 766 9.0 (8.3)
Margins (%)
Opg Profit Margins 13.7 13.1 8.4
Net Profit Margins 16.1 6.2 1.1

Source of all data: Company, DBS Bank

Page 4
Company Guide

IHH Healthcare

SGP inpatients admission

CRITICAL DATA POINTS TO WATCH

Critical Factors
Providing premium quality healthcare. IHH is a leading
international provider of premium healthcare services with a
global network of over 12,000 licensed beds in 73 hospitals
and medical centres. Its key markets include Singapore,
Malaysia, Turkey and India, which contribute 29%, 16%,
25% & 22% to group revenue respectively. In Singapore, it
operates four hospitals with a total of 942 licensed beds.
Singapore’s inpatient admissions have been steadily rising SGP avg patient rev (S$)
from 55k in FY12 to 79k in FY19.

Increasing scale in Malaysia. The group is focused on

increasing its scale in Malaysia and the number of operational
hospitals was 15 as at end-FY19. Average revenue per
inpatient admission increased to RM7.2k in FY19 because of
higher revenue intensities that resulted from more complex
cases undertaken as well as price increases. EBITDA compound
annual growth rate (CAGR) (3-year) was 16%, mainly due to
an increase in inpatient admissions and higher average
inpatient revenue (increased c.1.3x). Earnings will continue to Msia inpatient admission
be driven by growth in inpatient admissions as well as average
inpatient revenue.

Turkey operations through Acibadem. IHH holds a 90% stake

in Acibadem, which operates 21 hospitals as at end-FY19.
Revenue was driven by strong performance from its existing
hospitals as well as new revenue streams from the newly
opened Acibadem Altunizade hospital and expansion at
Acibadem Maslak. The long-term outlook in Turkey is likely to
improve due to the continuing growth in private healthcare
demand. Other than growth in local patients, Acibadem has Msia avg patient rev (RM$)
seen growth in foreign patients from the region especially at
Istanbul Hospital.

Tapping into new markets such as China and India. Besides its
home markets, IHH is also building up presence for its next
stage of growth, especially in India and China. The group
finally opened Gleneagles HK in March 2017 and Gleneagles
Chengdu in October 2019. In India, it made three major
acquisitions in 2015: (i) 51%-stake in Continental Hospitals in
Hyderabad, India, (ii) Global Hospital, a 5- hospital chain with
1,100 beds for INR12,838m (RM819m); iii) Fortis Healthcare. Turkey admission
These developments have helped the group gain strategic
footholds in new markets that can provide strong growth
avenues in the future.

Source: Company, DBS Bank

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Company Guide

IHH Healthcare

Appendix 1: A look at Company's listed history – what drives its share price

IHH’s share price vs EBITDA growth Remarks

230.0 - 8 % from 16%

210.0
p eak 14% Share price re-rating
12% driven by EBITDA

EBITDA growth (%)

190.0
M t E Novena + depreciation 10% growth.
Price Index

F ed Taper
170.0 o f MYR = +37%
T antrum = -11%
8%
f ro m peak
150.0 Minimal drop in share
6%
130.0 G ro wth driv en by Mt E
No v ena Hospital = +38% 4% price on bad news (<
110.0 2% 11%)
90.0 0%
Mar-13

Mar-14

Mar-17

Mar-18
Mar-15

Mar-16
Jul-12

Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18
Nov-12

Nov-13

Nov-14

Nov-17

Nov-18
Nov-15

Nov-16
Index
EBITDA growth (%)
EBITDA growth (ex Novena) %
EBITDA growth (ex Novena & depreciation of MYR) %

Source: DBS Bank, Thomson Analytics, Company

IHH’s share price vs major acquisitions / news Remarks

230.0 A c quisition
A cquisition of o f Tokuda & So ld 6.07% of We see little or no
Sh an ghai
G lo bal Cit y Clinic A p ollo;
h o spital
210.0
f irst
Ho spital G leneagles HK correlation between
an n ounced J V with an d Acibadem share price performance
190.0 Sh an ghai Altunizade opened
Dr L im J V with and news on major
ret ired as Ho n gxin
Wo n land T aikang
Price Index

170.0 t en der for

CEO A cquisition of In surance acquisitions or events.
Co n t inental
G leneagles Ho spital
150.0 HK
Signs deal
Pro p osed w ith
130.0 ac q uisition of Rad- Perennial on
L ink but did not G leneagles
O pening of Ch en gdu
110.0 M t E Novena mat erialised

90.0
Apr-13

Apr-14

Apr-15

Apr-17

Apr-18
Apr-16
Jan-13

Jan-14

Jan-16

Jan-17

Jan-18
Jan-15
Jul-12
Oct-12

Jul-13
Oct-13

Jul-14

Jul-15
Oct-15

Jul-16
Oct-16
Oct-14

Jul-17

Jul-18
Oct-18
Oct-17

Source: DBS Bank, Thomson Analytics, Company, SGX

IHH’s share price vs KLCI and STI Index Remarks

230.0 120.0 190.0 120.0
No major correlation
210.0 115.0 115.0
170.0 between share price
190.0 110.0 110.0
performance vs market
Sh are Price Index

Sh are Price Index

150.0
170.0 105.0 105.0
M arket Index

M arket Index

indexes.
150.0 100.0 130.0 100.0

130.0 95.0 95.0

110.0
110.0 90.0 90.0
90.0
90.0 85.0 85.0

70.0 80.0 70.0 80.0

Apr-13

Apr-14

Apr-15

Apr-17

Apr-13

Apr-14

Apr-15

Apr-17
Apr-16

Apr-16
Jul-12

Jul-13

Jul-14

Jul-13

Jul-14
Jan-13

Jan-14

Jan-15

Jul-15

Jul-16

Jan-17

Jul-12

Jan-13

Jan-14

Jan-15

Jul-15

Jul-16

Jan-17
Jan-16

Jan-16
Oct-12

Oct-13

Oct-14

Oct-15

Oct-16

Oct-12

Oct-13

Oct-14

Oct-15

Oct-16

IHH MY KLCI IHH SG STI

Source: DBS Bank, Thomson Analytics, Company

Page 6
Company Guide

IHH Healthcare

Leverage & asset turnover (x)

Balance Sheet:
Low gearing to pursue inorganic growth. Gearing remained
low at 0.15x as at December 2019, providing an ample war
chest for management to pursue inorganic growth
opportunities, particularly in China and India.

Share Price Drivers:

Inorganic growth and greenfield operations. The group is
embarking on its next growth phase for the long term, with
focus on China and India. Further initiatives via acquisitions
and/or greenfield operations should be viewed positively to Capital expenditure
boost long term growth. In addition, the ramp-up of
Gleneagles Hong Kong, if it progresses better than expected,
will be a catalyst for IHH’s share price.

Key Risks:
Economic slowdown. While healthcare is deemed as a
defensive sector, private healthcare will be impacted by a
slowdown in the economy. Elective procedures can be
deferred and patients may choose public hospitals as a lower-
cost alternative.
ROE (%)
Staff costs. Staff costs account for close to one-third of group
revenue. Supply shortages in doctors and/or skilled allied
healthcare workers could result in higher wages needed to
retain or attract talent.

Outbreak of epidemics. The outbreak of epidemics, such as

SARS and COVID-19 could adversely affect healthcare services
as consumers may opt to delay elective surgery and this could
negatively impact bed occupancy.

Exchange rate risk. As the group reports its results in Forward PE band (x)
Malaysian Ringgit (RM), any depreciation of the Singapore
Dollar (S$) and TRY against the RM will negatively affect its
results.

Company Background
IHH Healthcare Berhad is a leading international provider of
premium healthcare services in Asia and Central & Eastern
Europe, the Middle East and North Africa. As at end-2019, it
operates over 12,000 licensed hospital beds in 73 hospitals,
and there are plans to add over 830 beds from 2 greenfield
hospitals currently under construction and expansion of 2 PB band (x)
hospitals.

Source: Company, DBS Bank

Page 7
Company Guide

IHH Healthcare

Key Assumptions
FY Dec 2017A 2018A 2019A 2020F 2021F
SGP inpatients adm 74,878 74,878 74,878 74,878 74,878
SGP avg patient rev (S$) 3,382 3,585 3,800 4,028 4,269
Msia inpatient adm 208,932 221,170 233,407 245,645 257,883
Msia avg patient rev 2,200 2,354 2,519 2,695 2,884
Turkey adm
(RM$) 202,643 210,628 313,934 313,934 313,934

Segmental Breakdown
FY Dec 2017A 2018A 2019A 2020F 2021F
Revenues (RMm)
PPL-Total 6,903 7,450 10,745 10,785 11,429
Acibadem 3,854 3,676 3,765 4,249 4,623
IMU Health 250 258 259 323 348
Plife REIT 134 133 139 139 141
Others 2.13 3.64 4.07 4.07 4.07
Total 11,143 11,521 14,912 15,500 16,546
EBITDA (RMm)
Includes the acquisition
PPL-Total 1,349 1,518 2,267 2,191 2,389
Acibadem 618 617 854 871 948 of Fortis Healthcare
IMU Health 80.7 84.9 87.2 104 112
Plife REIT 283 322 188 305 311
Others (50.8) (64.4) (78.7) (81.8) (87.3)
Total 2,279 2,478 3,318 3,389 3,672
EBITDA Margins (%) Includes the acquisition
PPL-Total 19.5 20.4 21.1 20.3 20.9 of Fortis Healthcare
Acibadem 16.0 16.8 22.7 20.5 20.5
IMU Health 32.2 33.0 33.7 32.2 32.2
Plife REIT 210.9 241.6 135.0 220.0 220.0
Others (2,389.0) (1,769.6) (1,935.2) (2,011.3) (2,147.1)
Total 20.5 21.5 22.2 21.9 22.2

Income Statement (RMm)

FY Dec 2017A 2018A 2019A 2020F 2021F
Revenue 11,143 11,521 14,912 15,500 16,546
Other Opng (Exp)/Inc (2,348) (2,281) (3,292) (2,965) (3,056)
Operating Profit 1,250 1,543 1,741 1,995 2,238
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc 2.12 13.4 74.1 18.5 19.8
Net Interest (Exp)/Inc (642) (804) (772) (583) (630)
Exceptional Gain/(Loss) 555 0.0 0.0 0.0 0.0
Pre-tax Profit 1,164 752 1,043 1,430 1,629
Tax (335) (263) (528) (486) (603)
Minority Interest 140 138 36.6 19.2 22.3
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 970 628 551 963 1,048
Net Profit before Except. 415 628 551 963 1,048
EBITDA 2,231 2,496 3,170 3,407 3,692
Growth
Revenue Gth (%) 11.2 3.4 29.4 3.9 6.8
EBITDA Gth (%) (3.5) 11.9 27.0 7.5 8.4
Opg Profit Gth (%) (16.4) 23.4 12.8 14.6 12.2
Net Profit Gth (Pre-ex) (%) (42.2) 51.1 (12.1) 74.7 8.8
Margins & Ratio
Opg Profit Margin (%) 11.2 13.4 11.7 12.9 13.5
Net Profit Margin (%) 8.7 5.4 3.7 6.2 6.3
ROAE (%) 4.4 2.9 2.5 4.3 4.5
ROA (%) 2.5 1.5 1.2 2.1 2.2
ROCE (%) 2.6 2.6 2.1 3.2 3.4
Div Payout Ratio (%) 25.5 39.6 63.6 36.4 33.5
Net Interest Cover (x) 1.9 1.9 2.3 3.4 3.6

Source: Company, DBS Bank

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Company Guide

IHH Healthcare

Quarterly / Interim Income Statement (RMm)

FY Dec 4Q2018 1Q2019 2Q2019 3Q2019 4Q2019

Revenue 3,165 3,643 3,645 3,788 3,836

Other Oper. (Exp)/Inc (2,731) (3,173) (3,193) (3,292) (3,515)
Operating Profit 435 470 453 496 322
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc 10.2 (23.3) 4.00 4.13 89.3
Net Interest (Exp)/Inc 368 (260) (191) (106) (215)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 813 187 266 394 196
Tax (102) (196) (63.7) (112) (156)
Minority Interest (201) 98.5 (16.9) (45.5) 0.61
Net Profit 509 89.5 185 236 40.6
Net profit bef Except. 509 89.5 185 236 40.6
EBITDA 703 777 791 836 766

Growth
Revenue Gth (%) 11.4 15.1 0.1 3.9 1.3
EBITDA Gth (%) 6.0 10.5 1.8 5.6 (8.3)
Opg Profit Gth (%) 0.4 8.2 (3.7) 9.6 (35.2)
Net Profit Gth (Pre-ex) (%) (589.5) (82.4) 106.7 27.8 (82.8)
Margins
Gross Margins (%) 100.0 100.0 100.0 100.0 100.0
Opg Profit Margins (%) 13.7 12.9 12.4 13.1 8.4
Net Profit Margins (%) 16.1 2.5 5.1 6.2 1.1

Balance Sheet (RMm)

FY Dec 2017A 2018A 2019A 2020F 2021F
Net Fixed Assets 13,142 14,605 17,932 17,345 16,554
Invts in Associates & JVs 148 825 305 323 343
Other LT Assets 17,478 19,148 19,190 19,124 19,058
Cash & ST Invts 6,079 7,763 4,715 6,541 8,153
Inventory 282 351 350 467 499
Debtors 1,505 1,960 2,108 2,637 2,815
Other Current Assets 293 462 453 453 453
Total Assets 38,925 45,115 45,053 46,892 47,875

ST Debt 690 1,204 760 760 760

Creditor 2,796 3,752 3,858 5,055 5,335
Other Current Liab 554 527 731 867 984
LT Debt 6,948 9,331 8,266 8,266 8,266
Other LT Liabilities 2,037 1,794 3,344 3,344 3,344
Shareholder’s Equity 24,049 24,152 24,498 25,023 25,632
Minority Interests 1,852 4,355 3,596 3,577 3,555
Total Cap. & Liab. 38,925 45,115 45,053 46,892 47,875

Non-Cash Wkg. Capital (1,269) (1,506) (1,678) (2,365) (2,551)

Net Cash/(Debt) (1,560) (2,772) (4,311) (2,484) (873)
Debtors Turn (avg days) 48.3 54.9 49.8 55.9 60.1
Creditors Turn (avg days) 150.3 176.8 162.9 177.9 193.1
Inventory Turn (avg days) 14.9 17.1 15.0 16.3 18.0
Asset Turnover (x) 0.3 0.3 0.3 0.3 0.3
Current Ratio (x) 2.0 1.9 1.4 1.5 1.7
Quick Ratio (x) 1.9 1.8 1.3 1.4 1.5
Net Debt/Equity (X) 0.1 0.1 0.2 0.1 0.0
Net Debt/Equity ex MI (X) 0.1 0.1 0.2 0.1 0.0
Capex to Debt (%) 21.1 9.9 11.3 8.2 6.4
Z-Score (X) 2.4 2.3 2.4 2.4 2.5

Source: Company, DBS Bank

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Cash Flow Statement (RMm)

FY Dec 2017A 2018A 2019A 2020F 2021F

Pre-Tax Profit 1,164 752 1,043 1,430 1,629

Dep. & Amort. 978 939 1,355 1,394 1,434
Tax Paid (274) (380) (575) (350) (486)
Assoc. & JV Inc/(loss) (2.1) (13.4) (74.1) (18.5) (19.8)
Chg in Wkg.Cap. 158 (106) (524) 551 70.5
Other Operating CF 236 663 1,223 0.0 0.0
Net Operating CF 2,261 1,856 2,447 3,007 2,627
Capital Exp.(net) (1,615) (1,039) (1,023) (742) (577)
Other Invts.(net) 1,402 (345) (2,049) 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 43.6 0.0 0.0
Div from Assoc & JV 1.96 15.1 538 0.0 0.0
Other Investing CF 112 118 (105) 0.0 0.0
Net Investing CF (98.6) (1,250) (2,595) (742) (577)
Div Paid (446) (445) (263) (351) (351)
Chg in Gross Debt (458) 1,726 (1,169) 0.0 0.0
Capital Issues 2,120 1.28 0.0 0.0 0.0
Other Financing CF 340 (271) (1,462) (87.6) (87.6)
Net Financing CF 1,556 1,011 (2,894) (438) (438)
Currency Adjustments (82.4) 68.6 (7.3) 0.0 0.0
Chg in Cash 3,635 1,685 (3,049) 1,827 1,611
Opg CFPS (sen) 25.5 23.7 33.9 28.0 29.1
Free CFPS (sen) 7.84 9.86 16.2 25.8 23.4

Source: Company, DBS Bank

Target Price & Ratings History

Source: DBS Bank

Analyst: Rachel TAN
Andy SIM, CFA

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DBS Bank recommendations are based on an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return, i.e., > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame)
*Share price appreciation + dividends

Completed Date: 2 Mar 2020 11:04:51 (SGT)

Dissemination Date: 2 Mar 2020 12:06:49 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
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arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

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Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.

ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst
(s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of
the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the
real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
2
his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
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research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not have a
proprietary position in the securities recommended in this report as of 31 Jan 2020.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services:

3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
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should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced:

4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person
accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term
does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new
listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use
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DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the
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Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

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For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at dbsvhk@dbs.com

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Wong Ming Tek, Executive Director, ADBSR

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2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

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United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.
Kingdom
This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is
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In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and
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th
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jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE

DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd
Contact: Carol Wu Contact: Wong Ming Tek (128540 U)
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