2Q14 and 1H14 results above
IHH’s 2Q14 and 1H14 core EPS beat expectations, forming 27% and 52% of our previous FY14 forecast respectively. The beat came through organic growth as patient admissions and revenue intensity through new disciplines and ramp-up of operations from various start-up hospitals kicked in. Currency translation had a minimal impact on this set of numbers as the strengthening Singapore Dollar offset the impact of the weakening Turkish Lira after the reported numbers were converted into Malaysian Ringgit. EBITDA excluding contributions from PLife REIT grew 16% yoy to RM435m. As a result, core PATMI jumped 21% yoy to RM179m.
Monitoring Turkish Lira situation
Pertaining to Acibadem, management said that it will monitor its liquidity position to hedge its cashflows by conserving hard currency receipts from medical travellers to service the debts and interest payments of its non-Turkish Lira denominated loans. Almost all of IHH’s FX losses are translational and unrealised.
IHH can now better mitigate the effects of higher staff costs and other inflationary pressures through price adjustments, while it extracts greater operating leverage on the back of higher inpatient admissions from its new and existing hospitals. The bulk of the capex programme from 2Q14 to FY16 would be funded using operating cashflows, although bank facilities will be used for the remaining 60% capex for Gleneagles HK (c.RM1bn). Net gearing is healthy at 0.1x, and the management has continued to guide for an upbeat outlook and willingness to drive greater dividend payments. Reiterate Add.