CGS-CIMB analyst Ngoh Yi Sin has maintained her “add” rating on IHH Healthcare, but with a lower target price of RM6.10 ($2.00) and lower earnings per share (EPS) forecast. 

Ngoh has cut her EPS forecast for FY20-22 by 7.3-25.2% to reflect lower patient footfall and the slower return of foreign patients. 

Ngoh noted that IHH Healthcare sank into core profit after tax and minority interests (PATMI) loss of RM84.2 million in 2Q20 compared to RM240.1 million core PATMI in 2Q19. 

2Q20 topline fell 30% y-o-y on the back of movement controls, travel restrictions and postponement of elective procedures, which led to lower inpatient volumes across IHH’s various markets. 

IHH’s Singapore’s market was least impacted due to government support, which is expected to taper off from 3Q20, while India saw the worst margin decline due to negligible foreign patient revenue and the highest drop in inpatient admissions.

However, Ngoh expects the company to recover, as IHH saw a rebound in local patient volumes and resumption of elective surgeries as countries reopened in June. 

Occupancies across the network also recovered to 40-60% (vs. pre- Covid level of 65-70%), which underpinned its profit turnaround. Ngoh expects such positive momentum to sustain into 2H20. 

Furthermore, the group has taken various mitigating measures, including diversifying its service offerings into telemedicine, treatment of Covid-19 patients and diagnostic testing, which contributed 8-15% of 2Q20 revenue. 

The group has also undertaken cost and capital controls, including deferring 30% of its annual capital expenditure (capex) to after 2020, managing interest costs and FX exposure, and tapping on local government aid. 

As at 9.58 am, shares of IHH Healthcare were trading flat at $1.75, with a price-to-book ratio of 1.91 and dividend yield of 0.44%