Despite its strong share price performance YTD of >+20%, Maybank said it believes there are still reasons to track IHH Healthcare in 2025. The house noted that IHH has clear growth drivers ahead of it, leveraging on higher demand and revenue intensity, especially in India and Malaysia. Valuations are also ripe for a re-rating, in our view.
The house also said the healthcare group remains focused on organic and opportunistic inorganic growth. Maybank expects IHH to deliver 3-year forward revenue and EBITDA CAGR of 13% and resumed coverage with BUY and SOTP-based TP of MYR7.97.
Three reasons to look at IHH in 2025
Maybank said it likes IHH as the current demographic shift towards wealthier and ageing populations will drive growth in admissions and revenue intensity, securing long-term growth for private healthcare operators such as IHH. History has also evidenced that private healthcare is also a defensive industry in addition to being a growing one. Furthermore, we gather that IHH's valuations are ripe for a re-rating in 2025 with the touted listing of Sunway Healthcare and Columbia Asia Healthcare. Key risks are negative regulatory changes, valuation de-rating and a stronger MYR.
Growth opportunities – organic and inorganic
Maybank forecasts IHH to record 3-year forward revenue and EBITDA CAGR of 13%. It expects India and Malaysia to chart the most robust 3-year forward EBITDA CAGRs of 20% and 19% driven by bed expansion plans and acquisition of Island Hospital in the case of Malaysia. Singapore will experience EBITDA margin compression in FY25E due to the renovation of Mount Elizabeth Hospital but expects it to normalise in FY26E. IHH will remain selective on M&As with key criteria being EPS and ROAE accretive while maintaining a net debt to EBITDA ratio below 3.0x.
Positive traction on BAU business
Notwithstanding the above, Maybank forecasts a slightly softer 3-year forward core net profit CAGR of 11% due to additional finance costs. It values IHH on an SOTP methodology by applying an EV/EBITDA multiple across key geographical operations and the respective proportionate market capitalisation based on consensus TPs for Fortis Healthcare (FORH IN, CP: INR682, Not Rated) and Parkway Life REIT (PREIT ST, CP: SGD3.73, Not Rated). With that, Maybank's SOTP-based TP is MYR7.97, equivalent to 13x FY25E and 12x FY26E EV/EBITDA multiples.
