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5 Things You Need To Know About IHH Healthcare Berhad, The Largest Healthcare Stock in Singapore

With a market capitalisation of S$16.7 billion, IHH Healthcare Bhd (SGX: Q0F) is by far the largest healthcare stock in Singapore. It is nearly 10 times as large as the second biggest, Raffles Medical Group (SGX:BSL), which has a market capitalisation of “just” S$1.8 billion.

The group is dual-listed in Singapore and Malaysia and operates a network of hospitals, medical centres and clinics. In total, the group operates 49 hospitals, 30 medical centres and more than 50 clinics across the globe. It has recently expanded its geographical footprint into Greater China, opening its first hospital in Hong Kong.

Here are five interesting facts about the company that potential investors should know of.

Parkway Pantai

The group operates through three main operating subsidiaries. They are Parkway Pantai, (100% owned by IHH), Acibadem (60% owned) and its education arm (100% owned).

Parkway Pantai operates a network of 28 hospitals in Singapore, Malaysia, India, Greater China, Brunei and United Arab Emirates. Singaporeans are perhaps familiar with its local hospitals, Mount Elizabeth, Gleneagles and Parkway brand of hospitals. These brands have become synonymous with quality private healthcare and attract medical tourist from around the world.

Through Parkway Pantai, the group also has a 35.8% interest in Parkway Life REIT (SGX: C2PU), which has a portfolio of health-care related real estate, including the Mount Elizabeth, Gleneagles Hospital and Parkway East Hospital.

Acibadem

Through its 60% owned subsidiary, Acibadem, IHH Healthcare Berhad offers healthcare services across 21 hospitals in Turkey, Bulgaria and Macedonia. With a population of close to 80 million people, demand for healthcare in Turkey has been rapidly expanding. Furthermore, the country is strategically located between Asia and Europe, making it easily accessible for medical tourists.

Education arm

Lastly, the group also has an education arm that include International Medical College (IMC) and International Medical University (IMU) in Malaysia. Through this, the group is able to groom future doctors. With its connections to multiple overseas universities, students from IMU are also able to gain invaluable overseas experience during their course of study. The education arm, however, is just a small revenue contributor. In 2017, this segment only contributed RM250 million in revenue or around 2% of total revenue.

Growing Topline

IHH Healthcare Berhad has a stellar record of growing its total revenue. Between FY2014 to to FY2017 (the company has a 31 December year-end), the group’s revenue has grown from RM7.3 billion to RM11.1 billion. This has been achieved through a mix of both organic and inorganic growth. The opening of new hospitals, together with increasing revenue per inpatient admission from its existing hospitals, have been the main contributors to this growth. Higher inpatient occupancy rate in India and Turkey also contributed to organic growth in 2017.

Teething issues has lead to inconsistent earnings

IHH has, however, failed to turn its strong top-line growth into meaningful profits due to higher start-up and operating costs. Basic earnings per share, excluding one-off items, decreased from 10.95 sen in 2015 to 6.76 sen in 2017.

The group said that the lower profit in 2017 was mainly due to higher depreciation and amortisation, and the opening cost of two new hospitals in 2017. That said, investors should note that hospitals typically take a few years to turn a profit. Investors need to be patient and give the company time to sort out its teething issues in its new hospitals.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group. The Motley Fool Singapore contributor Jeremy Chia own shares in Raffles Medical Group.