IIHH Healthcare Bhd is the world’s second-largest healthcare provider by market capitalization. They are dual-listed on the SGX and the Bursa.

IHH Healthcare has three operating units: Parkway Pantai, which owns 32% of ParkwayLife REIT; Achibadem Holdings, which is 60% owned by IHH; and IMU Health. As of 2016, Parkway Pantai accounted for 62% of the group’s revenue and 84% of profits, while Acibadem contributed 35% of the revenue and 4% of profits.

IHH Healthcare has substantial operations in Singapore, Malaysia, Turkey, and India. They are expanding into China next, with the first hospital due to open in 2018. IHH hospitals operate under Mount Elizabeth, Gleneagles, Pantai and Parkway brands in Asia; and Acibadem brand in Turkey and CEEMENA.

IHH Healthcare – five eventful years since listing

IHH Healthcare has grown steadily since it went public. In the 5-years from 2012 to 2016, their revenue grew from RM7 billion to RM10 billion, and profits (excluding exceptional items) kept pace growing from RM619 million to RM866 million. Admittedly, the numbers include contributions from their acquisitions: IHH acquired majority stakes in Continental and Global Hospitals, India in 2015; and the Tokuda and City Chain Group, Bulgaria in 2016.

Above all else, Gleneagles Hong Kong and Acibadem Altunizade are a testament to IHH’s ability to conceive, finance and simultaneously deliver two large projects to plan.

IHH achieved a significant milestone earlier this year when they opened two prestigious hospitals, the 500-bed Gleneagles, Hong Kong and the 325-bed Acibadem Altunizade, Istanbul; on schedule. Above all else, the hospitals are a testament to IHH’s ability to conceive, finance and simultaneously deliver two large projects to plan.

Rapid expansion pinches the bottom line

IHH posted mixed results for 2016: revenue grew 12% year on year, but profits (excluding exceptional items) fell by 4%. The drop in profits was due to start-up costs incurred at the new hospitals; and the coup in Turkey, which hit both their business and the Lira.

The new hospitals in Hong Kong and Istanbul are ramping up smoothly, their revenues are ahead of plan while losses are within expectations. In time, the two are likely to be star-performers!

Their recent results for 9M17 inspire more confidence. IHH enjoyed strong growth in their key markets of Singapore, Malaysia, and Turkey. At the group-level, they posted 12% y-o-y growth in revenue and a 7% increase in EBITDA excluding the new hospitals. Although profits are still lower than the year before, the trend suggests the worst is over.

IHH outlines ambitious plans for China

IHH is not letting up on expansion! They have committed RM3 billion for expansion of their existing portfolio, and a further RM8 billion for expansion into Greater China. Their first hospital in China is the 350-bed facility in Chengdu (2018); to be followed by a 70-bed O&G facility in Nanjing (2019); and a 450-bed multi-specialty hospital in Shanghai (2019).

IHH entered the debt-market for the first time this year and raised U$500 million in perpetual securities. But, IHH just cashed in their 10.8% stake in Apollo Hospitals for RM554 million in April 2017 and is not pressed for funds. So the most plausible explanation for the new line of credit is that IHH is on the prowl for another acquisition.

Their smaller hospitals are profitable at the operating level within 12-18 months of opening. It is probably a good indicator of the demand for secondary healthcare, and IHH’s ability to tap into it.

IHH Healthcare is expanding aggressively into new markets to capture the demand for quality healthcare. Their plans, although not without risk, bode well for the company. Investors will no doubt evaluate the company’s prospects against the execution risks, but on the whole, it is a good story!

IHH Healthcare’s ambitions for China is covered by Nikkei Asian Review  and the South China Morning Post.