Malaysian Investor Thread

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MALAYSIAN INVESTOR
WORLD 2023
Part 14: China | IHH Healthcare Bhd
IHH's 4Q net profit falls 58% on RM306m impairment loss from China assets
Lam Jian Wyn February 28, 2023 20:53 pm +08

KUALA LUMPUR (Feb 28): IHH Healthcare Bhd reported a 57.8% decline in its net profit for the fourth quarter ended Dec 31, 2022 (4QFY2022) to RM191.3 million, from RM453.6 million a year ago, due to an impairment loss of RM305.9 million in relation to the group's assets and goodwill in China amid Covid-19 restrictions, and higher net finance costs and adjustments relating to MFRS 129.

In a Bursa Malaysia filing, the group said its earnings per share (EPS) fell to 2.2 sen from 4.9 sen in 4QFY2021.

Meanwhile, revenue rose 8.9% to RM4.9 billion from RM4.5 billion a year ago, thanks to more local and foreign patients returning.

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"Foreign patient volume recovery was especially strong in Malaysia and Singapore. The ramp-up of Gleneagles Hong Kong Hospital (GHK) and contribution from Acibadem Bel Medic in Serbia and Acibadem Adana Ortopedia Hospital in Türkiye also contributed to the higher revenue," it said.

For the full year ended Dec 31, 2022 (FY2022), the group's net profit slipped 17% to RM1.5 billion from RM1.9 billion a year ago, despite its revenue rising 5% to RM18 billion from RM17.1 billion.

Net profit declined due the RM1.5 billion impairment loss relating to its assets and goodwill in China, while revenue rose due to a high Covid-19 base in FY2021, as well as the impact from a weaker lira and MFRS 129-related adjustments.

"Even with the impairment losses, return on equity was at 6.4% as at end-December 2022. Balance sheet remained strong, with net cash generated from operating activities of RM3.7 billion and an overall cash balance of RM3.7 billion.

"Net gearing improved to 0.25 times (from 0.27 times as at September 2022)," it said.

EPS dipped to 17 sen from 20.2 sen in FY2021.

IHH Healthcare group chief operating officer Joe Sim said its fourth quarter results were the strongest revenue performance for the entire year.

"We recorded a robust core performance with revenue growth amidst inflationary pressures, rising interest rates and a sharp drop in Covid-19-related services.

"Reported net income was mainly impacted by a one-off RM305.9 million impairment in China — which will better position us for the year ahead — as well as higher operating costs.

"Underpinned by robust demand from both foreign and local patients, we expect to improve revenue as we keep focus on our ‘Care. For Good.’ strategy to deliver quality care and create sustainable value for all.

"We also continue to support our Acibadem colleagues in Türkiye, to keep our staff safe while rendering assistance to affected communities. Operationally, Acibadem is unaffected and has been able to step up support across the country.”

He also gave thanks to Dr Kelvin Loh, who resigned as IHH Healthcare's managing director, for his leadership of the group over the past three years.

"... he has been instrumental in setting a true north for the company of putting patients first, steering IHH out of the challenges presented by the Covid-19 pandemic and embarking on our sustainability journey," Sim said.

The group said it expects its cluster strategy and a strong pent-up demand for high quality private healthcare to drive return on equity and growth for its core hospitals and healthcare business, while it will develop its laboratory business into a core platform to provide end-to-end services to patients and clients.

"IHH will maintain a tight rein on costs and leverage synergies from its scale as well as operational productivity to mitigate cost pressures. It is confident that it will navigate the near-term challenges and deliver value for patients and long-term sustainable growth for all stakeholders."

The group declared a first and final dividend of seven sen per share, with an ex-date of March 30 and a payment date of April 28.

Its stock closed two sen or 0.34% lower at RM5.79, with a market capitalisation of RM50.99 billion.

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