IHH: Strong Operational Performance Drives Upgraded Outlook and Target Price

A leading investment bank has upgraded its recommendation for a prominent healthcare provider to “BUY,” citing robust financial performance driven by strong operational efficiencies and a promising future outlook. The bank has also raised its target price to RM9.67 per share.

Performance Review

In the third quarter of 2025 (3Q25), the company’s Malaysian operations demonstrated significant growth, with EBITDA surging by 24% to RM353 million, on the back of an 18% increase in revenue to RM1.3 billion. The EBITDA margin strengthened by two percentage points to 28%. This improvement was primarily due to a 9% rise in revenue per inpatient and a 2% growth in inpatient admissions. Despite ongoing negotiations with payors resulting in a 12-13% discount, the company’s EBITDA margin is expected to remain resilient through a focus on procurement optimisation, volume growth, and manpower cost efficiencies.

Future Outlook and Strategic Expansion

Looking ahead to 2026, Malaysia is projected to remain an attractive destination for medical tourism. The recent acquisition of Island Hospital in November 2024 has notably boosted the company’s medical tourism segment, with management confirming performance is on track with earlier projections. Foreign patient revenue contributions have doubled to 15% in 9M25 from 8% in FY24, indicating strong potential for further growth. Increased medical tourism traction is evident across key hospitals, leading to higher treatment acuity. Furthermore, daycare volumes and revenue are expected to expand, contributing to faster turnover and improved operational efficiency.

Singaporean operations are also anticipated to ramp up, with the recent reopening of Mount Elizabeth Orchard expected to contribute significantly in coming quarters and operations stabilizing by 2Q26. While the group navigates pressures from payors and government preventive-health initiatives, leading to a shift towards Ambulatory Care Centres and daycare facilities, 3Q25 EBITDA margins remained resilient at 28% and are expected to improve with rising volumes. In India, the completed acquisition of Fortis provides greater flexibility for future growth and capital structure optimization. The company intends to increase its stake in Fortis over the medium term, with Fortis progressing on expansion projects to strengthen service offerings. Collaboration between Fortis and Gleneagles India is expected to enhance the pan-India healthcare platform through harmonized procurement, aligned clinical programs, and enhanced operational scale, positioning the India division for growth with improved margins and deeper network integration.

Navigating Challenges

However, upcoming changes to Integrated Shield Plan (IP) policyholders’ coverage in Singapore from April 2026, including higher out-of-pocket costs and increased co-payment caps, could pose future headwinds. Management, however, does not expect this to dampen private-sector demand and plans to mitigate impacts through bundled high-end treatments and weekend room-rate discounts.

Recommendation

The investment bank reiterates its optimism for the company’s prospects for 4Q25 and 2026, expecting underlying growth across all key markets driven by robust demand and disciplined cost management. The management has reaffirmed its EBITDA margin guidance of 22-24%. Consequently, the bank has upgraded its recommendation to “BUY” with a target price of RM9.67 per share.