IHH Healthcare’s divestment strengthens presence in India


IHH Healthcare Bhd’s divestment of its entire 62.2% stake in Continental Hospitals Pte Ltd will allow the hospital group to focus on deepening its presence in India through Fortis Healthcare Ltd, said AmInvestment Bank Bhd (AmInvest).

Operationally, AmInvest is positive on the divestment, however, the financial evaluation cannot be ascertained at this juncture as the selling price was not disclosed in the announcement.

“Pending details on the selling price, we maintain our earnings estimates for the financial year 2021 (FY21), FY22 and FY23.

“At over 200 beds, Continental Hospitals is small compared to the more than 15,000 beds at IHH Group. For India’s market, IHH Healthcare still has significant exposure via Fortis Healthcare which operates 27 hospitals and 4,000 beds,” AmInvest analyst Alan Lim said in a note.

IHH Healthcare announced on Tuesday, its subsidiary, Gleneagles Development Pte Ltd has completed the sale of its entire 62.2% stake in Continental Hospitals to Gurunath Reddy and affiliates, IHH Healthcare’s partner shareholder in Continental Hospitals.

“The divestment is part of IHH Healthcare’s portfolio strategy review, focused on strengthening our healthcare capabilities for our patients, and creating more value for the stakeholders,” the company said.

AmInvest maintains a “Hold” call on IHH Healthcare with an unchanged fair value (FV) of RM6.27.

“We use discounted cashflow to value IHH Healthcare with a weighted average cost of capital of 7% and terminal growth rate of 3.5%. Incorporated in our FV is a 3% premium for our environmental, social and governance rating of four stars for the company,” he added.

Continental Hospitals owns a hospital which is located at Hyderabad, India. Recall that in 2015, IHH Healthcare acquired a 51% stake in Continental Hospitals. Subsequently, IHH Healthcare increased the stake to 62%.

According to its website, the hospital’s key specialties include gastroenterology, oncology, orthopaedics, neuroscience, cardiology and multi-organ transplants.