Healthcare business to recover in 2H21interest
09 Jul 2021
Analyst expects in-patient occupancy to improve at IHH Healthcare-run hospitals in India and Turkey in the 2H21
Healthcare companies with specific ventures stand to grow their businesses in the second half of the year (2H21) despite expectations of Covid-19 remaining a drag on economies and public life.
Hong Leong Investment Bank’s (HLIB) analyst Gan Huan Wen stated IHH Healthcare Bhd’s global operations would assist in its earnings recovery.
He expects in-patient occupancy to improve at IHH Healthcare-run hospitals in India and Turkey in the 2H21 as lockdown measures begin to relax and Covid-19 cases decrease.
“Given IHH Healthcare’s diversified geographical revenue streams (compared to KPJ Healthcare Bhd’s operations solely in Malaysia), we expect a stronger recovery in earnings in 2H21 from better patient occupancy rates in India and Turkey compared to Malaysia.
“We maintain our ‘Buy’ rating on IHH Healthcare with a target price (TP) of RM5.90,” Gan stated in a report yesterday.
As for KPJ Healthcare, in-patient occupancy is forecast to remain stagnant as the government’s recovery plan expects the movement restrictions to be lifted towards the end of the year.
“While lower in-patient occupancy is expected to be partially cushioned by higher average revenue per in-patient (which was 27% higher year-on-year in the first quarter of 2021 (1Q21)), we reckon any meaningful recovery in KPJ Healthcare’s earnings will likely only arrive in financial year 2022. As such, we maintain ‘Hold’ call with TP of RM1.01,” he noted.
Pharmaniaga Bhd’s move to secure 42 million doses of Sinovac vaccines would fuel its earnings growth.
The 14 million fill-and-finish doses would bring a significant contribution to its earnings but margins are expected to remain razor-thin on 10 million finished doses which are purely of trading in nature.
“Based on our back of the envelope calculations, we expect the fill-and-finish of 14 million doses to add circa RM15.5 million at the Ebit level.
“We expect the earnings contribution of the 14 million fill-and-finish doses to occur mainly in 2H21 given Pharmaniaga had started distribution in the 2Q21 and has a fill-and-finish capacity of two million doses per month (potentially rising to four million subject to regulation changes).”
HLIB maintained a ‘Hold’ on Pharmaniaga with a TP of RM1.10.
As for UEM Edgenta Bhd, Gan expects its earnings to be driven by new contract wins in the facilities management division, particularly in Healthcare Support Services due to its partnership with Asma Advanced Solutions LLC to secure jobs in Saudi Arabia and cutting edge facilities management in SaaS.
UEM Edgenta has an efficiency advantage over competitors and can sell its services to companies that would prefer to run facilities management in-house.
Hence, Gan maintains a ‘Buy’ call on UEM Edgenta with a TP of RM2.40.
Source: The Malaysian Reserve
