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10 Key Takeaways From IHH Healthcare Bhd’s 2018 Q1 Results

With a market capitalisation of more than S$10 billion, IHH Healthcare Bhd (SGX: Q0F) is by far the largest health care stock in Singapore. It operates a network of 49 hospitals, more than 50 clinics and also operates a medical university and college. The group boasts highly recognisable and distinguished brands such as Parkway, Mount Elizabeth and Gleneagles.

Here are some of the important financial highlights of its 2018 first-quarter results:

1. Revenue grew 6% year-on-year to RM2.9 billion from RM2.7 billion the corresponding period last year. Higher revenue was due largely to organic growth at existing operations and contributions from the recently-opened Gleneagles Hong Kong and Acibadem Altunizade in Turkey (both opened in March 2017).

2. Earnings before interest, tax, depreciation and amortisation (EBITDA), a common metric used to measure earnings after excluding non-cash items and the highly variable interest and tax expense, increased by 8% to RM608.9 million from RM565.6 million last year. This was achieved through the higher revenue.

3. Profit after tax and minority interest (PATMI) excluding exceptional items, however, plummeted 40% to RM120.5 million from RM201.8 million last year. The drop was due to foreign exchange losses and higher depreciation, amortisation and finance cost due to the opening of the two aforementioned hospitals. Basic earnings per share were 50.6% lower at 1.21 sen per share, down from 2.45 sen per share.

4. The group had total debt of RM 6.9 billion and cash on hand worth RM6.1 billion. It, therefore, had a net debt position of RM775 million.

5. As of 31 March 2018, total assets were valued at RM38 billion and the group had total equity of RM25.3 billion. However, if we exclude non-controlling interests and perpetutities, shareholder equity amounted to RM21.4 billion. Net tangible assets was RM8.8 billion. As such, the group had a debt-to-net-tangible-asset ratio of 78% or debt-to-shareholder-equity of 32%.

6. The following is a chart outlining inpatient admission volume changes and average revenue per inpatient admission:

Source: IHH Healthcare Bhd 2018 Q1 Earnings Presentation

As you can see, average revenue per inpatient admitted grew in all geographies, while inpatient volume rose everywhere, except Malaysia, which declined a marginal 0.6% year-on-year.

7. IHH generated RM430 million through its operations after accounting for working capital changes. The group spent RM213 million in cash investments this quarter, resulting in a RM217 million positive free cash flow generation.

8. The group has embarked on three projects that are to be completed by 2018. They are the expansion of one hospital in Malaysia and one in Turkey, and the opening of Gleneagles Chengdu in China. Another hospital in China is also expected to be completed by 2019.

9. On the outlook for the rest of the year, the group said:

“Parkway Pantai continues to see top line growth in its home markets of Malaysia, Singapore and India, supported by aging demographics, rising affluence and improved case mix. … In China, Parkway Pantai’s pipeline of new hospitals remain on track and progressing according to plan.

It added:

“While the group expects the pre-operating costs and start-up costs of new operations to partially erode its profitability during the initial stages, the Group seeks to mitigate the effects by ramping up patient volumes in tandem with phasing in opening of wards at these new facilities in order to achieve optimal operating leverage.”

10. At the time of writing, shares of IHH Healthcare Berhad exchanged hands at S$2.02 per piece. This translates to an annualised price-to-earnings ratio of 123 (excluding one-off items), a price-to-book ratio of 2.08 and a trailing dividend yield of 0.5%.

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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 Jeremy Chia doesn’t own shares in any companies mentioned.