• Healthy set of 1QFY18 results
• Heliconia to take a 2.0% stake
• Expansion underway

Results In-line

Health Management International’s (HMI) 1QFY18 results were largely in-line with our expectations. Revenue grew 6.9% YoY to RM117.1m, forming 24.8% of our full-year forecast. This was achieved on the back of higher patient load and average bill size across the group’s two hospitals, as well as higher student headcount in the group’s education business.

Notably, the average inpatient and outpatient bill sizes have both increased YoY, growing 3.6% and 12.2% to RM7.6k and RM217, respectively. EBITDA grew 11.0% YoY to RM28.7m, backed by improving revenue intensity and cost management. PATMI increased 123.4% YoY to RM13.8m, forming 23.9% of our FY18 forecast. This was in part due to the consolidation exercise that occurred earlier this year, causing 100% of the group’s net profit to become attributable to shareholders.

~S$11m Placement Exercise to Heliconia

HMI also announced the signing of an agreement that would induct Heliconia Capital Management Pte Ltd (Heliconia), a wholly-owned subsidiary of Temasek, as a strategic shareholder through a ~S$11.0m placement, or a 2.0% stake in the enlarged share capital of the group. HMI will be issuing 16.9m new ordinary shares at S$0.65 per share, which represents a slight discount of 0.76% to the closing price of HMI shares traded on 13 Nov. We note that this move allows HMI access to Heliconia’s network and resources as the group executes its growth strategies.

Ceasing Coverage

Looking forward, we note that management remains focused on tapping the rising demand for healthcare across the region. At Mahkota, the group remains on track to increase operational bed capacity from 266 to 300 beds in FY18. At Regency, a new hospital extension block will commence construction in FY18, pending relevant approvals.

These initiatives are aligned to Malaysia’s national economic blueprint, where healthcare travel has been identified as one of the National Key Economic Areas in pushing the country towards a high-income nation by 2020.

Notwithstanding the above, due to an internal reallocation of resources, we are ceasing coverage on the stock.

Source: OCBC Research - 14 Nov 2017