• Revenue Growth: 10% increase in Q3 2024 compared to Q3 2023.
• EBITDA Growth: 7% increase in Q3 2024 compared to Q3 2023; 12% growth excluding one-off items.
• PATMI Growth: 9% increase excluding one-off items in Q3 2024 compared to Q3 2023.
• EBITDA Margin: Reported at 23% for Q3 2024.
• Cash Flow: Strong cash flow performance with a healthy cash balance at the end of September 2024.
• Malaysia Revenue Growth: 11% increase due to more inpatient admissions and higher revenue intensity.
• Singapore Revenue Growth: 5% increase with stable EBITDA margins at 29%.
• Turkey and Europe Revenue Growth: 17% increase with EBITDA growth of 12%.
• India Revenue Growth: 9% increase; EBITDA growth of 32% excluding one-off items.
• Hong Kong Revenue Growth: 13% increase with EBITDA growth of 63% and margins at 15%.
• Interim Dividend: MYR0.045 per share paid in October 2024.

• Warning! GuruFocus has detected 4 Warning Sign with XKLS:5225.

Release Date: November 28, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• IHH Healthcare Bhd (XKLS:5225) reported strong growth in core revenue and EBITDA, driven by higher patient volumes and increased revenue intensity across all markets.
• The company completed the acquisition of Island Hospital, enhancing its leadership position in Malaysia and supporting the country's medical tourism aspirations.
• IHH Healthcare implemented the CDC's antimicrobial stewardship guidelines across its 80-plus hospitals, making it the largest international private hospital network to do so.
• The company achieved double-digit growth in revenue, EBITDA, and PATMI on a year-to-date basis, excluding one-off items.
• IHH Healthcare successfully raised an unrated sukuk program for RMB4 billion, which was over four times oversubscribed, indicating strong investor demand.

Negative Points

• Margins in Malaysia fell by 100 basis points due to higher staff costs, despite an 11% revenue growth.
• Singapore operations faced margin pressure due to ongoing renovations at Mount Elizabeth Orchard, which reduced the number of operational beds.
• India's EBITDA and EBITDA margins declined by 3% year-on-year due to a one-off reversal of expenses in the previous year.
• The company faces ongoing challenges with third-party payers, including insurers, particularly in Malaysia, where medical inflation has been a concern.
• Translation impacts due to currency fluctuations affected the reported financial performance, with the ringgit's depreciation impacting results.

Q & A Highlights

Q: What initiatives were taken to improve EBITDA margins in India, and how many beds are needed for Gleneagles Hong Kong to achieve positive PATMI? A: In India, several initiatives were implemented, including procurement and IT cost synergies, alongside ramping up volume and intensity at facilities. For Gleneagles Hong Kong, currently operating at 300-320 beds, an additional 50-60 beds are expected to be added in 2025 to achieve positive PATMI.

Q: How is IHH Healthcare addressing margin pressures in Singapore and Malaysia, and what is the outlook for EBITDA growth in 2025? A: In Singapore, renovations at Mount Elizabeth Orchard are causing temporary margin pressures, expected to stabilize by the end of 2025. In Malaysia, despite payer pressures, margins are expected to remain stable at 25% due to cost initiatives. Overall, EBITDA growth is anticipated in 2025, despite these pressures.

Q: What is the strategy for managing occupancy and expansion in India, and will there be margin volatility during this period? A: IHH aims to maintain occupancy in the high 60s to early 70s and will expand through brownfield projects or tactical acquisitions when necessary. While some margin volatility may occur, particularly in large projects like Mount Elizabeth Orchard, the strategy is to ramp up in bite-sized phases to minimize impact.

Q: What is the impact of foreign currency translation on IHH's financials, and does it affect debt covenants? A: The foreign currency translation reserve has been impacted by currency fluctuations, but it does not affect debt covenants or have a cash impact. The company remains financially stable despite these translation effects.

Q: How is IHH Healthcare addressing insurer issues in Malaysia, and what is the impact of potential value-based outcome models? A: Insurer issues in Malaysia are being addressed through engagement and potential premium increases. The introduction of co-payment is expected to stabilize the market. The impact of value-based outcome models is still uncertain, and IHH is awaiting further details from the Malaysian Ministry of Health.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.