What Investors Need to Know about IHH Healthcare’s Latest First Quarter Earnings

IHH Healthcare (SGX: Q0F) is a dual-listed (in both Singapore and Malaysia) global healthcare group that’s majority-owned by Malaysia’s sovereign wealth fund, Khazanah Nasional. IHH Healthcare is actually one of the largest healthcare groups in the world; it currently owns and operates 4 hospitals in Singapore, 11 in Malaysia and has interests in another 16 hospitals through its holdings in Acibadem Healthcare Group, the largest healthcare group in Turkey.

The company had just announced its first quarter results on Thursday. So, let’s see how it fared.

Operating results

The healthcare group saw a good quarter with its quarterly revenue improving 8% year-on-year to RM1.76 billion. Profit meanwhile, jumped by 25% to RM159 million.

IHH Healthcare’s revenue streams actually come mainly from four different principal subsidiaries: Parkway Pantai; Acibadem Holdings; IMU Health; and Parkway Life Real Estate Investment Trust (SGX: C2PU). The main contributor to IHH Healthcare’s revenue growth this quarter was Parkway Pantai, which saw its revenue increase by 14% to RM1.04 billion compared to a year ago. Meanwhile, a large portion of Parkway Pantai’s growth itself had been due to the continued improvement in revenue from its Mount Elizabeth Novena Hospital in Singapore.

Elsewhere, IMU health and Parkway Life REIT both saw their revenues increase by 1% and 11% respectively to RM50.3 million and RM63.9 million. Acibadem Holdings performed the ‘worst’ in relative terms after seeing stagnant revenue of RM640 million for the quarter.

In terms of earnings contribution – specifically EBITDA (earnings before interest, taxes, depreciation and amortization – Parkway Pantai and Parkway Life REIT both grew by 23% and 11% respectively to RM258.9 million and RM51.9 million. Acivadem Holdings and IMU Health were the two that provided a drag with respective declines of 8% to Rm115 million and 1% to RM21.2 million.

For a snapshot of IHH Healthcare’s healthy operational statistics in the quarter, inpatient admissions for Parkway Pantai had seen growth in both its Singapore and Malaysia-based hospitals; admissions grew by 6.4% to 15,226 patients for the former and increased by 9.3% to 44,602 patients for the latter. In addition, revenue per inpatient admission also increased in Parkway Pantai’s two key markets of Singapore and Malaysia. In Singapore, the subsidiary’s hostpails saw the figure move up by 7.6% to RM23,187 while in Malaysia, there’s been an increase of 8.5% to RM4,757.

On the balance sheet side, IHH’s net debt to equity ratio (where net debt is equal to total debt minus total cash) stayed relatively stable at 11.4% compared to 11.6% in the last quarter.

Foolish Summary

In the earnings release, IHH Healthcare had warned of “higher staff costs and other inflationary pressures” that are likely to negatively impact the company’s results. Although there’s the possibility that such pressures may reduce IHH Healthcare’s profit margins, the company’s confident in its ability to pass on cost increases to customers.

What will be a challenge for the company though, is currency fluctuations. This is a pertinent problem for IHH Healthcare given its operations in a number of different countries.

The company ended Friday’s trade at S$1.61 per share, giving its shares a price to book ratio of 1.8 and an estimated price to earnings ratio of 43. There were no dividends declared for the quarter by the company.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.