Should You Invest? An Introduction to IHH Healthcare, Parent Company of Pantai and Gleneagles (Part 1)
Hello, fellow readers, I am starting a new coverage on IHH Healthcare (IHH) and hopefully this will be useful for anyone looking to invest in IHH. I am structuring this slightly different in that I will be starting from the very basics for this company. Part 1 here will describe what IHH does and how it generates its revenue. It also looks at where its businesses are located, the key trends driving the company and the strategy it is pursuing currently. Part 2 will cover more in depth the financials of IHH and its valuation when the 2020 annual report is out.
IHH Healthcare is in the medical industry, focused on providing healthcare services to the masses in Malaysia and internationally
If you are sick, most likely you will go visit the doctor to find out what’s wrong with you. If the condition is bad, you would want to admit yourself to a hospital. These are where IHH makes its money from — providing healthcare services in terms of diagnosing, admitting and treating its patients. If you are a Malaysian, you would be familiar with the names of Pantai and Gleneagles as private hospitals that you go to. IHH owns the hospitals of Pantai, Gleneagles, and Prince Court in Malaysia, and the likes of Mount Elizabeth, Parkway Shenton, Parkway Health, Acibadem, and Fortis in Singapore, India, Sri Lanka, and Central Europe. Other than that, it also owns the prestigious International Medical University that trains medical professionals in Malaysia.
Most of IHH’s businesses are actually concentrated in overseas countries even though it is based in Malaysia
A full 84% of revenue was derived from overseas businesses in the first 9 months of 2020, making IHH an international company in this regard. This proportion has been increasing from 80% in 2018, and 82% in 2019 to 84% currently. Out of its international businesses, Singapore comprises the majority share of this with 29% of IHH’s revenue being generated there. Central and Eastern Europe comes in second at 26%, while India consists of 19%. Malaysia operations comprises of only 16% of total revenue, making it one of the smaller business segments for IHH.
In terms of patients admission however, India ranks the highest in 2019, with a total of 363,126 patients. Singapore being the highest contributor to revenue actually ranks the lowest in terms of patient admissions at 78,541. Malaysia and Central and Eastern Europe patient admissions were about the same at 218,051 and 221,493 respectively.
This indirectly meant that India had the lowest average revenue per patient admission at RM6,376 while Singapore has the highest at RM32,782 per patient. Malaysia and Central and Eastern Europe had similar levels of average revenue per patient.
Further population aging and a rise in both infectious and non-infectious diseases, are the key trends driving IHH’s future prospects.
As IHH inherently relies on people getting more healthcare services, there is a key trend of population change that is supporting its future prospects. The world is currently undergoing a period of lower birth rates and longer life expectancy. The amount of people aged over 60 years is expected to increase significantly in the next 30 years. The World Health Organisation expects the proportion of people aged over 60 years old to increase from 12% in 2015 to 22% by 2050, nearly doubling in proportion. Data from the World Bank have confirmed that this is indeed the case with the population aged over 65 increasing in proportion since the 1980s.
You would have surely gone through the Covid-19 period in your country and realise the importance of having a well-functioning healthcare system. The pandemic effectively increased the demand for quality healthcare services worldwide, with many experts forecasting that pandemics will emerge at a higher frequency in the future.
Non-communicable diseases are also expected to continue its increasing trend with non-communicable diseases accounting for 7 of the top 10 causes of deaths in the world.
IHH is focused on international expansion mainly, while trying to achieve economics of scale and improvement in efficiencies
IHH is currently undertaking the strategy of expanding its businesses internationally in what is termed the “Geographic cluster strategy”. It is trying to centralise most of its international operations in one place and create a global procurement office that centralises the buying and selling of equipments. Through this, it hopes to achieve economies of scale and reduce its cost structure.
