IHH Healthcare Berhad (SGX: Q0F) is a leading integrated healthcare provider and one of the largest healthcare groups in the world. The group operates over 15,000 beds across 80 hospitals in 11 countries such as Turkey, Singapore, Malaysia, India, and Brunei, and it provides the full spectrum of healthcare services from clinics to hospitals to quaternary care as well as ancillary services.
IHH is a giant in the healthcare industry and is also dual-listed on both the Singapore Exchange and Bursa Malaysia. I decided to take a look at how the group derives its revenue and profit by region, as this was an easy way to understand the group’s massive operations. Note that the group recently acquired Amanjaya Specialist Centre and Fortis Healthcare in India, which helped to boost overall revenue for H1 2019 by 32% year on year to RM 7.3 billion.
The company’s revenue and profit mix should provide interesting insights into the areas in which IHH generates the most revenue, and also where most of its profit is flowing.
1. Revenue mix
The table above shows that IHH’s main sources of revenue are from Singapore, India, and Acibadem (Turkey). These contribute 28.7%, 22.3%, and 25.6% of total revenue, respectively. For Singapore, IHH runs the Mount Elizabeth, Gleneagles, and Parkway brands and has four hospitals with close to 1,000 beds as well as a network of more than 50 medical clinics and centres. With an aging population, IHH expects this division to continue to see increased demand for healthcare services.
For India, IHH acquired a 31.1% stake in Fortis Healthcare in late 2018. Fortis is the second-largest hospital player in India, with a nationwide footprint. IHH also has a major stake in Continental Hospitals, Gleneagles Global Hospital, and a 50-50 joint venture with Apollo Hospitals for a total of 36 hospitals in India. Acibadem is one of Turkey’s leading private healthcare operators with more than 4,000 beds across 22 hospitals and 15 medical clinics.
2. Net profit mix
IHH’s net profit mix sheds more light on which regions are doing well and which are not, and it offers an interesting insight into how the group functions. As the table above shows, Singapore and Malaysia are by far the most profitable regions for the group as they contribute to the bulk of the profit. Net profit margins for Singapore and Malaysia were 19.2% and 16.3%, respectively.
Three regions — India, North Asia, and Acibadem — are reporting losses for H1 2019. Fortis is making good progress on improving its operational and financial performance and reported a profit in INR terms for Q2 2019. For North Asia, Gleneagles Hong Kong is still in the ramp-up phase, while Gleneagles Chengdu and Shanghai are slated to open in the next 18 months. Acibadem is facing headwinds due to the Turkish lira, but IHH has paid down some of its non-lira debt in order to reduce foreign exchange losses.
Interesting prospects for IHH
IHH is facing growing pains now as it seeks to improve the performance of Fortis Healthcare, but investors should see this as a necessary transition for the group to grow larger. The new hospitals in China are also in their incubation phase and will start contributing to the group in about two years’ time. It will be interesting to keep track and monitor IHH’s progress as it continues to grow in the region.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.