IHH ... Underperformed For 2015-2016 Due To High Valuations

IHH is expected to register strong double digit growth going forward, underpinned by the positive outlook for the private healthcare sector as well as the company’s expansion plans.

The problem is that even this pace of growth is not driving down lofty valuations fast enough (15 March 2014) - thus likely limiting upside gains for investors for the next year (2015) or so …

At the prevailing price of rm3.69, it shares are trading at 41 times and 34 times its estimated earnings for 2014 and 2015 respectively. The stock may well underperformed over the next year (2015) or two (2016) while earnings play catch up with valuations.

The company will be paying out a minimum 20% of yearly earnings.

Its gearing stood t 13% as end 2013.
Revenue wise, the company is faring quite well. Revenue was up some 17% in 2013 to rm6.76 billion. This was driven by its three key operating bases in Singapore, Malaysia and Turkey.

Newly opened hospitals are also turning around nicely with rising demand. The Mount Elizabeth Novena in Singapore and two hospitals in Turkey achieved operating break even within a year of opening.

Singapore and Turkey, are also popular destinations for medical tourists from their respective regions.

The outlook for growth going forward remains positive. Demand for private healthcare is comparatively resilient to downturns and indeed, expected to keep trending higher on the back of longer life expectancy, ageing population, greater health awareness, rising disposable incomes, subscription to medical insurance and so on…

Rising demand for healthcare services will be met by IHH’s expansion plans. The company has numerous Greenfield and brownfield projects in the pipeline, scheduled for commissioning between 2014 and 2016.