IHH Healthcare: BUY (Initiating Coverage) S$1.24

·    One of largest private healthcare providers in the world with presence in
  8 countries

·    Poised to capture demand for healthcare with aging population, medical
  travel

·    Established presence, strong growth profile with 55% profit CAGR (FY11 -
  14F)

·    The key healthcare player in the region; Initiate with Buy, TP: S$1.38

A growing healthcare mammoth.  IHH Healthcare Berhad is one of the largest
private healthcare providers in the world; and is a market leader in
operating integrated healthcare and related services in Singapore, Malaysia
and Turkey. In total, it has a geographically diverse network, spanning 8
countries and operating over 4,800 licensed beds in 30 hospitals. Over the
next few years, the Group is projected to add over 3,300 hospital beds in
17 hospitals across the region bringing total beds to 8,350.

Healthcare is the right sector.  We believe current industry trends favour
IHH’s growth over the next few years. These include ageing population,
developing healthcare markets in Asia, rising affluence and increasing
medical tourism in the region. We forecast a topline CAGR (FY11-14F) of
16.4%, driven by its expanding network, higher patient load as well as
intensity. Coupled with margins expansion as operating efficiencies
increase, as well as lower interest expenses, we project a robust net
profit CAGR of c.55%, reaching RM$920m in FY14F.

Initiate with BUY, sum-of-parts TP: S$1.38. We value the various parts of
the Group, and derive at a target price of S$1.38. This equates to 36x/ 30x
FY13F/14F PE. While this is a premium to regional healthcare peers, we
believe IHH offers investors growth as well as leading healthcare market
exposure in various countries, hence it should command a scarcity premium.