Health Management International (HMI) reported its 4QFY17 results, with revenue up 5.2% YoY to RM111.7m, leading to a net profit of RM10.7m, vs. RM4.9m in 4QFY16. Keep in mind that this is the first quarter of a fully consolidated set of results, reflecting the acquisition of noncontrolling interests in its two hospitals.

On a full year basis, FY17 revenue was up 9.5% to RM435.8m, helped by higher patient load and average bill sizes in its two hospitals – Mahkota Medical Centre and Regency Specialist Hospital, while PATMI was up 3.5% to RM20.6m. Recall that there were one-off fees and costs of ~RM8.2m related to the above-mentioned acquisition. Excluding non-operational items and one-off costs, core PATMI of RM32.1m came in within expectations.

Separately, a final dividend of RM1.0cents/share was declared. Looking ahead, FY18 earnings should offer further clarity to investors on earnings, given the consolidation of ownership in both hospitals and lesser one-off costs.

We believe our investment thesis remains intact, with the group on a healthy growth momentum, backed by a multi-strategy approach, expansion plans and a strong management team.

Pending an analyst briefing, we maintain our BUY rating but put our DCF derived (base year FY18) fair value estimate of S$0.80 under review.

Source: OCBC Research - 24 Aug 2017