AmInvestment positive on IHH’s digital healthcare initiative

IHH Healthcare had launched its telemedicine services in May last year, says analyst


IHH Healthcare Bhd’s foray into digital healthcare is seen as a positive move by analysts, as such platforms are becoming increasingly popular among customers for its efficiency.

AmInvestment Bank Bhd analyst Alan Lim Sheong Chun stated that IHH Healthcare had launched its telemedicine services in May last year.

“The company aims to develop its digital healthcare capabilities in the next three years and has allocated US$100 million (RM418 million) for this purpose,” he wrote in a research note on the healthcare group yesterday.

He is positive on IHH Healthcare’s venture into the digital healthcare space as this should lead to better operating efficiency and improved patient experience.

“For example, hypertension patients can reduce their frequency of visits to hospitals by submitting their blood pressure data (taken at home) periodically to the hospitals.

“Operationally, doctors will be able to focus their time on more serious cases,” he said.

In addition, artificial intelligence and machine learning can also be applied in certain areas such as detecting abnormalities in patients’ scans and X-ray readings.

In March last year, IHH Healthcare invested in a minority stake in telehealth start-up Doctor Anywhere (DA), which is based in Singapore and offers on-demand healthcare solutions through a digital platform.

It aims to provide quick access to health and wellness solutions from anywhere.

In early September 2021, IHH Healthcare made a follow-on investment as part of DA’s Series C fundraising.

Lim stated that IHH Healthcare’s earnings for the third quarter of 2021 (3Q21) should decline quarter-on-quarter but improve on a year-on-year basis.

“Covid-19 daily new cases in India have eased to 20,000 cases in September from the peak of around 400,000 cases in May.

“This should result in lower revenue for IHH Laboratory (Pantai Premier Pathology) in 3Q21 due to lower Covid-19 tests,” the analyst stated.

He added that IHH Laboratory generated RM975 million in the first half of 2021.

India has the highest number of labs at over 420 (whereas 87% of the total 483 labs in four key markets).

“Although the number of elective surgeries may increase in 3Q21, we expect these would not be enough to offset the impact of the lower earnings from laboratory tests,” Lim opined.

He maintained a ‘Hold’ call on IHH Healthcare with an unchanged fair value of RM6.29 which was derived based on a discounted cashflow valuation model with a weighted average cost of capital of 7% and terminal growth rate of 3.5%.

“Incorporated in our fair value is a 3% premium for our environmental, social and corporate governance (ESG) rating of four stars for the company,” he said.

CGS-CIMB Securities Sdn Bhd analysts Eing Kar Mei and Tay Wee Kuang reiterated their ‘Add’ call for IHH Healthcare but raised its target price to RM8.21 from RM6.65.

They noted IHH has generally addressed the main ESG factors and does not have material ESG issues.

“If there were any ESG issue, we believe it is most likely due to the lack of or inconsistencies in disclosure, which could be due to the sheer size of its global operations.

“IHH has recently appointed a chief sustainability officer to look at its ESG framework and possibly revamp its way of ESG disclosures,” they wrote in a report yesterday.

CGS-CIMB is not concerned about IHH Healthcare’s ability to provide quality service as it is well governed and has strong financials.

“Its challenge is to provide affordable healthcare; to this end, IHH has invested in technologies to better identify and predict the outcomes and cost of care.

“We believe the impact of higher cost of medical treatment has less impact on IHH’s customers, who are less price-sensitive,” they said.

They are not too concerned about its mixed ESG scores as the sector itself is heavily regulated.

“Most of IHH Healthcare’s hospitals were also awarded with accreditations which are good indications of its compliance to healthcare standards as it involves on-site visits to the hospitals rather than voluntary disclosures,” they said.