IHH: Earnings Rebounds Back

Result Update 

In QE31/12/2018, IHH reported a net profit of RM509 million as compared to a net loss of RM104 million in the immediate preceding quarter, QE30/9/2018. Revenue rose 11% q-o-q to RM3.165 billion. As compared to the corresponding quarter last year, net profit rose 4-fold while revenue increased by 10%. The company announced:

Revenue and EBITDA improved on the sustained organic growth at existing operations and contribution from Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital, both of which opened in March 2017. Amanjaya Specialist Centre and Fortis Healthcare (“Fortis”), acquired in October 2018 and November 2018 respectively, also contributed to the higher revenue and EBITDA. This was despite the offsetting translational effect from a stronger Malaysian Ringgit against the currencies of other countries in which IHH operates. On a constant currency basis, revenue and EBITDA grew strongly by 28% and 33% respectively.


Table: IHH's last 8 quarterly results


Graph: IHH's last 31 quarterly results

Financial Position

As at 31/12/2018, IHH's financial position is deemed healthy with current ratio at 1.9 times while gearing ratio at 0.6 time.

Valuation

IHH (closed at RM5.66 yesterday) is now trading at a PE of 88 times (based on last 4 quarters' EPS of 6.44 sen). Assuming it can maintain its last quarter's earning of 5.8 sen, IHH's full-year earning would be 23.2 sen, and its PER would be lowered to 24 times. As it is, KPJ is fully valued.

Technical Outlook

IHH is in a gradual downtrend line, RR with resisatnce at RM6.10. Its immediate resistance is the recent high at RM5.80 while its immediate support is at RM5.50.


Chart: IHH's weekly chart as at Feb 27, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on strong financial performance, healthy financial position and commanding position in the healthcare sector, IHH is a good stock for long-term investment. However its upside is capped by its demanding valuation.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.