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3 Things Investors Should Know About IHH Healthcare Bhd’s Latest Earnings

IHH Healthcare Bhd (SGX: Q0F)(KLSE:5225.KL) is an international provider of healthcare services in markets where it thinks the demand for quality healthcare is growing rapidly. Right now, the company is active in Asia (this includes Singapore and Malaysia), Central & Eastern Europe, the Middle East, and North Africa.

Asia remains the company’s largest market. Some of the company’s brands include Gleneagles, Mount Elizabeth, Pantai, ParkwayHealth and Acibadem.

Two weeks ago, IHH Healthcare reported its 2017 first quarter results. Let’s look at three useful pieces of information from the announcement investors may want to know:

1. The overall result

The table below shows some of the important numbers from IHH Healthcare’s income statement for the first quarters of 2017 and 2016:


Source: IHH Healthcare 2017 first quarter earnings release

We can see that IHH Healthcare enjoyed an 8% increase in revenue in the reporting quarter due to higher patient volumes and contributions from new hospitals. As a result of a gain from the sale of Apollo Hospital in India, IHH Healthcare’s PATMI (profit after tax and minority interests) had jumped by 100% to RM 470 million.

But, if we adjust for one-off gains, IHH Healthcare’s PATMI would have declined by 15% in the first quarter of 2017 compared to the first quarter of 2016. Pre-operating and start-up costs of new hospitals were the culprits.

2. The performance of the various segments

Here’s a table showing the revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) changes of IHH Healthcare’s various business segments in the first quarter of 2017:


Source: IHH Healthcare 2017 first quarter earnings release

There was broad-based growth in terms of revenue amongst IHH Healthcare’s segments as all of them reported higher revenue.

But, Parkway Pantai and Acibadem recorded lower EBITDA. The former had suffered from RM 81.1 million in pre-operational costs incurred by the Gleneagles Hong Kong Hospital, which opened only in March this year. As for the latter, pre-operational losses for the Acibadem Altunizade Hospital in Turkey (it opened only in March this year too), higher operating costs and rental expenses, and the depreciation of the Turkish lira, all contributed to the segment’s lower EBITDA.

IMU Health’s positive performance was driven by adjusted tuition fees and a shortened semester for some courses. Meanwhile, the PLife REIT, which is represented by the Singapore-listed Parkway Life REIT (SGX: C2PU), enjoyed positive contributions from nursing homes acquired in 2016 and the first quarter of 2017.

3. What lies ahead

As investors, we rely on many tools, including management’s forecasts, to help us gain insight on what to expect for the near- to long-term performance of our investments’ businesses.

With regard to IHH Healthcare, this is what the company said about its future in its earnings release:

“IHH continues to believe in the sustained demand for quality private healthcare in its home markets and key growth markets of India and Greater China.

In the year ahead, IHH expects to face cost pressures on several fronts. These include continued competition for talent, pre-operational and start-up costs from new operations, and higher purchasing costs with the stronger US Dollar.

It will mitigate these through prudent cost management, taking on higher revenue intensity procedures and ramping up new facilities to achieve optimum operational efficiencies.

With its wide geographical footprint, the Group is exposed to geopolitical uncertainty and currency movements. This may result in translational differences in its balance sheet and income statement. IHH adopts natural hedges where possible and continues to explore all options to “de-risk” currency exposure for Acibadem.

IHH remains confident that its brands and network of hospitals, supported by its strong financial position, will enable it to successfully navigate the challenging operating environment.”

 

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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 Lawrence Nga doesn’t own shares in any companies mentioned.