IHH: Healthcare Sector Sees Robust Earnings Driven by Revenue Intensity, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent player in the healthcare sector has reported a solid financial performance for 2025, with core net profit reaching RM1.8 billion, an 8% increase year-on-year. While these results aligned closely with internal forecasts, meeting 98% of expectations, they slightly lagged behind consensus estimates, which were met at 92%. The company’s total revenue for 2025 climbed 6% year-on-year to RM26 billion, underpinned by strong growth across various regions.
Performance Review
The impressive revenue growth was primarily fueled by enhanced revenue intensity across key markets. Turkiye & Europe led the charge with an 18% increase, followed by Singapore, Malaysia, and India, each contributing a 7%, 7%, and 6% rise, respectively. This strong performance was also supported by a 4% increase in overall inpatient admissions. On a sequential basis, the hospital and healthcare segment reported a 3.2% quarter-on-quarter revenue increase in the fourth quarter of 2025, reaching RM6.5 billion. Revenue intensity saw modest improvements in Singapore (+3%), Malaysia (+4%), and India (+2%). Notably, Gleneagles Hong Kong achieved breakeven in December 2025, driven by higher inpatient volumes.
Despite the overall positive trend, some regional variations were observed. Singapore’s revenue experienced a 4% quarter-on-quarter decline in Q4 2025, primarily due to lower inpatient admissions, even as revenue intensity improved. The company also declared a final interim dividend per share (DPS) of 5.5 sen, bringing the total 2025 DPS to 10.5 sen, an increase from 10 sen in 2024.
Future Outlook and Investment Rating
Looking ahead, management expresses optimism for a recovery in 2026, anticipating a boost from the full resumption of operations at Mount Elizabeth Orchard and a normalization of patient volumes. The investment bank initiating this report has introduced a 2028E Earnings Per Share (EPS) forecast of 31.4 sen, representing a 15% year-on-year growth. In light of these positive projections and a sustained growth momentum, the target price has been raised to RM10.27 from RM9.60. This adjustment is based on an increased EV/EBITDA multiple of 17x, up from 16x, reflecting stronger expected earnings contributions, particularly from Mount Elizabeth Hospital, where bed capacity is set to expand from 110 to 220 beds. This expansion is expected to drive higher occupancy and improved operating leverage.
The company is expected to sustain its growth trajectory, supported by ongoing capacity expansion, rising patient volumes, and resilient demand for elective procedures. However, potential downside risks include regulatory changes, weaker-than-expected inpatient volumes, and increased competition from private hospital peers.
Given the robust outlook and strategic expansions, the investment bank maintains a BUY recommendation for the stock, with the revised target price indicating a significant upside from the last traded price.
