IHH Healthcareupload.xinhua08.com/2012/1019/1350629333308.pdf · IHH Healthcare 17 October 2011...

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

17 October 2011

PP16832/01/2012 (029059)

Initiating Coverage 16 October 2012

PP16832/01/2013 (031128)

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Malaysia

IHH Healthcare A Cut Above the Rest

A leader in premium healthcare. IHH is one of the largest listed

private healthcare providers in the world. Its healthcare business

comprises a global network of 4,900 licensed beds in 30 hospitals. In

addition to holding leading positions in three key markets – Singapore,

Malaysia, and Turkey – IHH also has a presence and investments in

other attractive markets such as the PRC, India, Hong Kong, Vietnam,

Macedonia and Brunei. We like its long-term growth story, but believe

that much of its near-term prospects are priced in. Initiate with HOLD.

Big plans ahead. In our view, IHH’s business model is highly scalable,

and it is continually seeking growth. Its long-term plan is to expand into

attractive markets in Asia and across the CEEMENA region, while

continuing to strengthen its presence in existing markets. With well-

advanced plans to deliver more than 3,400 new beds over the next four

years, we expect recurring PATAMI to grow at a CAGR of 38% over

FY12F-16F.

Healthy structural demand. The healthcare sectors in IHH’s key

markets are supported by at least one of the following positive structural

demand factors, namely: (1) high population growth, (2) a growing

proportion of the elderly, (3) rising affluence leading to demand for

quality healthcare and (4) the growing strain on public healthcare

systems. We believe that these factors limit any downside in revenue.

Medical tourism – another boost. Demand for quality healthcare has

driven the affluent in developing nations to seek medical treatment in

neighbouring countries offering such care. IHH is one of the big players

in medical tourism and is well-positioned to gain from this trend.

Improvements in international connectivity would lend further support to

the growth in medical tourism.

Deserves premium valuation. We like IHH’s long-term growth story,

and believes its size and positioning within the sector justifies a

premium valuation to the sector. We peg our TP of MYR3.15 to 1x PEG

(38% CAGR over next five years). However, current share price implies

limited upside and we see better potential entry points in the future.

IHH Healthcare – Summary Earnings Table Source: Maybank-KE, *Pro-forma figures

FYE Dec (MYR m) 2011A* 2012F 2013F 2014F Revenue 5,190.8 7,306.5 7,350.0 8,340.8 EBITDA 1,094.0 1,561.4 1,621.0 1,875.0 Recurring Net Profit 245.7 498.5 663.0 811.9

Recurring EPS (sen) 3.0 6.2 8.2 10.1 EPS growth (%) 212.1 102.9 33.0 22.5 DPS (cents) 0.0 0.0 0.0 0.0 PER 104.3 51.4 38.6 31.6 EV/EBITDA (x) 24.5 17.2 16.6 14.3 Div Yield (%) 0.0 0.0 0.0 0.0

P/BV(x) 1.6 1.5 1.4 1.3 Net Gearing (%) 7.8 net cash net cash net cash

ROE (%) 2.6 4.8 3.7 4.3 ROA (%) 1.3 3.3 2.6 3.0

Hold (new)

Share price: MYR3.20 Target price: MYR3.15 (new)

James KOH [email protected] (65) 6432 1431 YEAK Chee Keong, CFA [email protected] (65) 6433 5730 Wong Chew Hann [email protected] (03) 2297 8686

Stock Information

Description: An integrated private healthcare services provider with leading positions in Singapore, Malaysia and

Turkey. Its healthcare networks provide the full spectrum of services, from primary healthcare clinics, to secondary and tertiary hospitals, to quaternary care and post-operative rehabilitation centres.

Ticker: IHH MK Shares Issued (m): 8,055.4 Market Cap (MYR b): 8.4

3-mth Avg Daily Turnover (US$ m): 15.3 FBMKLCI 1654.4 Free float (%): 33.8

Major Shareholders: % KHAZANAH 45.7 Mitsui & Co 20.5

Key Indicators

ROE – annualised (%) 4.8 Net cash (MYR m): (1219)

NTA/shr (MYR): 0.62

16 October 2012 Page 2 of 38

IHH Healthcare 17 October 2011

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Contents

Key Investment Merits P3

Dynamics of the Healthcare Industry P5

Holding a Premium Brand in Singapore P8

Hub and Spoke Model in Malaysia P11

Serving the Affluent in Turkey P14

Expanding Presence in other Attractive Markets P16

Other Businesses P16

Size has its Advantages P17

Financials P20

Valuation P26

Key Risks P28

Financial Statements & Ratios P29

Appendix I: Key Management Profiles P30

Appendix II: Hospital Assets, Networks and Key Operating Data P32

Appendix III: Terms for Provision of Report, Disclaimers and Disclosures P35



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Key investment merits

An integrated healthcare player. IHH Healthcare Berhad (IHH) is an

integrated healthcare services provider with market-leading positions in

Singapore, Malaysia and Turkey. In addition, it also has operations and

investments in the PRC, India, Hong Kong, Vietnam, Brunei and

Macedonia. Its hospital network offers the full spectrum of healthcare

services, ranging from primary healthcare clinics to secondary and

tertiary hospitals, to quaternary care and post-operative rehabilitation

centres. The core businesses are operated through three key

subsidiaries, namely Parkway Pantai Limited (PPL), Acibadem Holding

and IMU Health.

Figure 1: Summarised shareholding and group structure

Source: Company

Strong global network of hospitals and medical facilities. IHH

operates a network of 4,900 licensed beds in 30 hospitals. In addition,

IHH operates medical centres, clinics and ancillary healthcare

businesses across eight countries. Through IMU Health, IHH runs a

private university in Malaysia which offers medical, dental, pharmacy,

nursing, health science and other medical programmes.

Leading positions in three key markets. According to Frost and

Sullivan, IHH is the largest private healthcare provider in Singapore,

with an estimated market share of 43.9% in terms of the number of

licensed beds as at Dec 2011. Its position has been further

strengthened by the recent addition of 333 new beds from Mount

Elizabeth Novena Hospital in Jul 2012. In Malaysia, IHH holds the No. 2

position, with a network of hospitals under the “Pantai” and

“Gleneagles” brands, and holds an approximate market share of 15.1%

as at Dec 2010. The Acibadem hospital network is the largest private

healthcare provider in Turkey, with a 5.2% market share as at Dec

2011.



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Not resting on its laurels. IHH was formed through a series of M&As

and corporate restructuring activities. In the process, Parkway Holdings

was delisted from the Singapore Exchange in 2010 at premium

valuations. Subsequently, Parkway and Pantai were housed under the

PPL umbrella. With the acquisition of Acibadem, the hospital group has

grown even bigger. Despite its current size, it is not resting on its

laurels. Expansion plans are in place and the group is on a continual

lookout for acquisition and expansion opportunities in attractive markets

in Asia and across CEEMENA (Central and Eastern Europe, Middle

East and North Africa).

Expansion plans mapped out. Over the next four years, IHH plans to

add more than 3,400 new beds to its current capacity. This would be

delivered through new hospital developments and expansion of its

existing facilities. The new beds include about 760 beds which are

expected to be managed through HMAs (Hospital Management

Agreements).

A magnet for medical travellers. Other than serving its respective

domestic markets, IHH also attracts patients from foreign countries

seeking medical treatments at its hospitals. This is helped by its

recognised brands and reputation for performing highly complex clinical

and surgical procedures. Many of its hospitals also embrace new and

advanced technologies. Its strong reputation draws quality doctors and

medical staff who are recognised as leaders in their fields. Many of its

hospitals are accredited with international standards such as the JCI,

ISO, MSQH and EFQM certifications. PPL in particular is a strong

player in the medical tourism market given that Singapore is a key hub

for medical travel in Asia with about 461,000 medical travellers in 2011,

based on figures provided by Frost and Sullivan.

Highly scalable model. IHH has demonstrated its abilities in acquiring

and integrating hospital chains and creating synergies and efficiency

gains. The most successful example would be the integration between

the Parkway and Pantai group hospitals. We believe that IHH can

replicate this highly scalable business model in various other attractive

regions, and it has stated its intention of doing so. With premium

branding and size, the success rate for IHH would be much higher than

any other healthcare groups in the region, in our view.

Valuation. We value IHH at MYR3.15 per share. Our target price is

pegged to a PEG ratio of 1x (38x FY13F PER). We choose the PEG

valuation method to take into account the growth potential that would

come from IHH’s capital spending on expanding its hospital networks,

as the positive earnings impact from these expansions would only show

up in the next 3-5 years; IHH has already incurred 75% of the total

expansion capex. We forecast recurring EPS to grow by CAGR of 38%

p.a over the next 5 years.



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Dynamics of the healthcare industry

Public-sector healthcare fails to keep pace. Healthcare sector

developments are tied to a nation’s economic wealth, population growth

rate, proportion of aging population and also government policies. As a

country progresses, public healthcare systems usually fail to keep pace

with the increasing demand for higher quality healthcare services. This

is due to the lack of infrastructure funding, overcrowding and shortage

of physical and human resources. In addition, demographic factors

such as population growth and an aging population add to the strain on

the public healthcare systems.

Private healthcare operators fill a need. These factors provide

opportunities for private healthcare providers to come in to meet the

needs which public healthcare often fails to fulfill. Other than serving

the domestic market, private healthcare providers may also attract

medical travellers from neighbouring countries seeking better medical

treatment due to the lack of proper facilities and services in their home

countries.

Government plays a role. The government often plays a critical role in

directing greater usage of private services to those who can afford it. It

could also introduce certain policies and regulations to promote such

activities in order to reduce the burden on public-sector healthcare

facilities. An example is means-testing in Singapore, in which subsidies

for public healthcare are adjusted based on residents’ income levels.

Ease of air travel further supports medical tourism. The ease of air

travel promotes travelling overseas for medical attention. It is common

for medical travellers to seek attention from countries within a 4- to 8-

hour flight time from their home country.

Attractive regions in developing and emerging markets. While

mature economies generally have well-developed healthcare systems,

many developing and emerging markets are facing challenges in

providing quality healthcare to their residents. These countries tend to

have lower ratios of beds and healthcare workers per 1,000 population.

In many of these countries, there is a clear trend of a growing

population and also a shift towards a higher proportion of the elderly,

driven by low birth rates, low mortality rates and improved life

expectancy. At the same time, rising affluence also results in a greater

demand for improved living standards and higher quality of healthcare.

The countries that offer such opportunities for private healthcare

operators are generally in Asia, particularly Southeast Asia, and the

CEEMENA regions.



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Figure 2: Hospital beds per 1,000 population ratio

Source: Frost & Sullivan, IPO Prospectus

Figure 3: Doctors per 1,000 population ratio


Figure 4: Registered nurses per 1,000 population


Southeast Asia AsiaCEEMENA Developed



OECD average of 3.1

OECD average of 2.9

OECD average of 8.4



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Figure 5: Population growth in selected countries

Source: WEO Database, Sep 2011, Frost & Sullivan, IPO Prospectus

Figure 6: Healthcare expenditure in several markets

Source: IPO Prospectus

Healthcare Expenditure Growth per

capita (2006 – 2009)

Healthcare Expenditure as % of

GDP (2011)

IHH Home Markets IHH Key Markets Developed Markets

Rapid Development

Strong further growth

potential



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Holding a premium brand in Singapore

Well-developed healthcare model. Singapore operates a well-

developed healthcare system in which service delivery is split between

public and private systems. The public system is managed by the

Ministry of Health (MOH), which ensures that residents receive quality

and affordable medical care through subsidised charges. However, with

the liberalisation of private medical insurance and increasing strain on

the public healthcare system, more patients are opting for private

healthcare.

Admission figures on the rise. Overall hospital admissions in

Singapore have been growing at a CAGR of about 2.5% from 2006 to

2011. Private hospital admissions accounted for about 24% of total

admissions, with some signs that private hospital admissions have

been growing at a marginally faster pace than public hospital

admissions in recent years. This is attributed to long waiting times in

public hospitals, higher disposable income, and private insurance

coverage.

Figure 7: Total hospital admissions & growth Figure 8: Hospital admissions share, Private vs. Public

Source: MOH Singapore, Maybank-KE Source: MOH Singapore, Maybank-KE

Strained public healthcare system. Singapore faces a bed shortage

situation in its public healthcare system, due to a more rapid increase in

demand relative to supply. The total number of hospital beds stood at

about 11,509 as at end-2010, out of which 24% are private hospital

beds. The opening of Khoo Teck Phuat Hospital in 2010 added 550

beds to the public sector capacity, but the next significant addition

would only be in 2014. Public hospitals currently run at high occupancy

rates of 80% to 95%, based on MOH statistics. The demand side has

been driven by high population growth, including the influx of foreigners,

and a growing proportion of those aged 65 and above.

Supply growth lags demand. While there are plans for new supplies

of public hospital beds, this is not expected to be able to keep pace with

demand growth. Private healthcare will still play a critical role in

alleviating the strain in supply. According to Frost & Sullivan, private

hospital revenue will grow at a CAGR of 7.7% between 2011 and 2016,

which bodes well for PPL.



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Figure 9: Supply of public hospital beds would not meet demand

New Hospital/Expansion No. of

beds Scheduled opening

Ng Teng Fong General Hospital 700 2014

Jurong Community Hospital 286 2015

KhooTeckPuat Hospital rooftop garden conversion 32 2013

Integrated building near Changi General Hospital 250 2014

Community hospitals at Yishun and Outram 800 2015

Seng Kang General Hospital 1,400 2018

Source: MOH Singapore, Maybank-KE

Figure 10: Private hospital growth trend, Singapore


PPL is a key private healthcare player. There are currently seven

private hospitals in Singapore. PPL operates three of these: Gleneagles

Hospital, Mount Elizabeth Hospital and Parkway East Hospital.

According to Frost & Sullivan, PPL had a 43.9% market share in terms

of number of private licensed beds in 2011, and a 69.3% share in terms

of private hospital industry revenue, in 2010.

Figure 11: Private sector market share, Singapore

Source: Frost & Sullivan, Maybank-KE

Synonymous with premium quality. PPL is also known for operating

one of the most expensive hospitals on the island. The “Parkway”

branding is synonymous with premium and high-quality healthcare.

PPL’s Mount Elizabeth Hospital holds the reputation as the premium

brand hospital in Singapore, attracting overseas patients seeking the

best and most advanced medical treatments in the region.



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An established medical tourist hub. Singapore is one of the most

popular medical tourism hubs in Southeast Asia, especially for its

expertise in oncology, organ transplants, cardiology and neurological

surgery. The bulk of the medical tourists comes from Indonesia (47%),

followed by Malaysia (14%). In 2010, Singapore recorded medical

tourism revenue of SGD856m, a 10.1% YoY growth. The revenue from,

and volume of, medical travellers is expected to grow by a CAGR of

14.7% and 13.1% respectively between 2011 and 2016.

Figure 12: Medical travel market size, Singapore


Raising the standard with Mount Elizabeth Novena Hospital. This

new hospital by PPL has a capacity of 333 beds and 13 operating

theatres. The first phase has been completed, with 180 beds added in

July 2012. The remainder is projected to be operational by the second

half of 2013. The total cost of the hospital development is estimated at

SGD2.0b, of which SGD1.8b was incurred in FY11. Mount Elizabeth

Novena Hospital will raise PPL’s capacity by 46% upon its full opening,

in terms of number of beds.

The hospital will be the first private hospital in Singapore to offer

various state-of-the-art medical technologies. Located within the Mount

Elizabeth Novena Hospital would also be the Mount Elizabeth Novena

Specialist Centre, which would contain 254 dedicated medical office

suites with a GFA of about 173,935 sqft. 216 of these units have been

sold to specialist doctors at an average price of SGD3,819 psf. PPL

would retain the balance units for its own use.

Figure 13: Mount Elizabeth Novena Hospital

Source: Company website



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Hub and spoke model in Malaysia

A two-tier healthcare system. Malaysia operates a two-tier health

system, split between the public and private sectors. Public healthcare

is provided and managed by the Ministry of Health (MOH) and funded

by the tax system. It is also heavily subsidised by the government and

is used by the majority of the country’s population of 28m. The private

system, on the other hand, is user-charged and demand is mainly

driven by the more affluent who seek shorter waiting times as well as a

higher quality of care and service. The private sector is beginning to

play a more important role in alleviating the strain on the public

healthcare system. The healthcare sector is also one of the 12 National

Key Economic Areas (NKEAs) identified as drivers of economic activity

in Malaysia’s Economic Transformation Programme (ETP).

Rising hospital admissions. Owing to demographic and economic

factors similar to those in Singapore, hospital admission rates are also

rising in Malaysia. Inpatients and outpatients are growing in both the

public and private sectors. However, statistics show that admissions in

the private sector are growing at a much higher rate than in the public

sector.

Figure 14: Public-sector admission figures, Malaysia Figure 15: Private-sector admission figures, Malaysia

Source: MOH Malaysia, Maybank-KE Source: MOH Malaysia, Maybank-KE

Double-digit growth in the size of the private hospital market. With

governmental support, the healthcare industry is expected to see

continual expansion and more public-private integration in order to

relieve the strained resources of the public sector. As a result, both

public and private healthcare expenditure is expected to increase over

the next five years.

Private healthcare sector revenue will be driven by a greater uptake of

private insurance and a rise in medical travellers seeking a cheaper

alternative to Singapore and Thailand. As in Singapore, the structural

drivers of population growth, an aging population and rising affluence

are also factors in Malaysia’s healthcare demand growth. The following

figure illustrates Frost &Sullivan’s forecast for the growth of private

hospitals market size in Malaysia; they estimate private hospital

revenue CAGR of 18.1% between 2011 and 2016.



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Figure 16: Private hospital growth trend, Malaysia


Plenty of room for medical tourism growth. We believe that there is

plenty of room for the growth of medical tourism in Malaysia. The

medical travel market grew from MYR253.8m in 2007 to MYR509.8m in

2011, a CAGR of 19% over the period. In 2011, about 4% of PPL’s

Malaysian hospital revenue was derived from medical travellers, 90% of

which were from Indonesia.

Malaysia is a cost-competitive destination for medical travellers who are

less affluent but seek better quality healthcare than their home country

can provide. According to Frost & Sullivan, patients from Sumatra tend

to travel to Penang or Melaka for medical treatment, while more affluent

patients from Jakarta and Surabaya prefer Singapore. Therefore, we do

not think that developing the medical travel market of PPL’s Malaysian

hospitals would cannibalise the medical tourism of its Singapore

hospitals, but would instead promote the growth of the overall size of

the medical travel market in the region.

Figure 17: Medical travel market size, Malaysia


RM



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PPL is the second-largest private healthcare player in Malaysia

(after KPJ Healthcare), with 11 hospitals and 2,025 licensed beds

currently. It owns and operates nine “Pantai” hospitals and two

“Gleneagles” hospitals across Peninsular Malaysia. Of these, two are

JCI-accredited while seven are accredited by the MSQH. Three new

hospitals in the pipeline and expansion plans for four of its existing

hospitals would add about 1,138 new beds by 2015, raising PPL’s bed

capacity in Malaysia by 56%. According to Frost & Sullivan, PPL holds

a market share of about 15.1% in terms of the number of licensed beds

as at 31 Dec 2010.

Figure 18: Private sector market share, Malaysia


Operating via a “hub and spoke” model. PPL’s hospital network in

Malaysia operates via a “hub and spoke” model. Hub hospitals have a

higher number of specialist doctors and operate a wider array of

specialty medical services, with more advanced equipment relative to

spoke hospitals. Hub hospitals are also typically located in large urban

centres. The Spoke hospitals operate in smaller urban centres and

large towns. Generally, Hub hospitals have 180 to 350 licensed beds

with more than 30 specialist doctors, while Spoke hospitals have 80 to

150 licensed beds with between 15 and 30 specialist doctors.



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Serving the affluent in Turkey

Healthcare system in Turkey. The Ministry of Health, the Social

Security Institution, the Ministry of Education, other ministries and

private healthcare institutions are the main healthcare providers in

Turkey. Turkey also has a Universal Health Insurance (UHI) scheme

which is provided by the Social Security Institution

(SosyalGuvenlikKurumu – SGK). The UHI provides basic coverage to

all residents through public hospitals. Those who are covered by SGK

may also receive medical services in private hospitals that have

agreements with SGK. Private hospitals under the SGK may charge a

premium (30-90%) above SGK tariffs for serving such patients.

Leading position in Turkey. IHH completed the acquisition of a 60%

indirect interest in Acibadem Holding in Jan 2012 for a purchase

consideration of USD823m. Acibadem operates the largest private

healthcare network in terms of the number of non-SGK and partial-SGK

beds in Turkey. The Acibadem brand has been providing high-quality

medical care and services in Turkey since 1991, and operates a

network of 14 hospitals with more than 1,800 licensed and operational

beds today. This represents an approximate 5.2% market share in

Turkey’s fragmented private healthcare market, where there are a total

of about 28,063 private hospital beds.

Figure 19: Private sector market share, Turkey


Serving affluent patients. Acibadem hospitals and outpatient clinics

target primarily the more affluent patients in Turkey, in particularly those

in Istanbul. Its other “AileHastanesi” brand hospitals target the mid-

income patients.

Growing medical tourism industry. Turkey is also emerging as an

important medical travel hub, attracting patients from the CEEMENA

region. Its strategic location draws patients from Europe, Asia and the

Middle East who seek quality healthcare. Turkey has the highest

number of JCI-accredited hospitals in the world, at 38. Acibadem has

six JCI-accredited hospitals. Frost & Sullivan estimate the size of the

medical travel market in Turkey at USD332m in 2011. They expect the

market to grow at a CAGR of 19.8% over 2011 to 2016, to USD843m.



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Figure 20: Medical travel market size, Turkey


Growth and consolidation expected. The implementation of the UHI

is expected to spur the growth of the healthcare market in Turkey. In

addition, the common factors that we have mentioned such as rising

affluence, aging population, growing medical travel industry also applies

to Turkey’s healthcare industry. With the fragmented nature of the

industry, we also expect further industry consolidation which presents

good opportunities for IHH to extend its presence in the market.

According to Frost & Sullivan, the private healthcare market is expected

to grow by a CAGR of 5.7% between 2011 and 2016.

Figure 21: Private hospital growth trend, Turkey




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Expanding its presence in other attractive markets

IHH also has a presence in other growth markets such as the PRC,

Hong Kong, India and CEEMENA region. In China, PPL operates eight

medical centres in Shanghai and Chengdu, serving the affluent. It was

also appointed operator of a 450-bed hospital in the Shanghai

International Medical Zone (SIMC). In Hong Kong, PPL has a clinic in

Central and is looking at expanding its clinic network. It also intends to

bid for landmark greenfield hospital sites. IHH has regularly entered into

JVs, consultancy agreements as well as HMA agreements (agreements

to manage operational hospitals), which allow it to expand its presence

in various other attractive markets.

Other businesses

Education business. IHH runs an education business mainly through

IMU Health, through which it owns and operates International Medical

University (IMU), a private university that offers a total of 18 academic

programmes including medicine, dentistry, pharmacology, nursing,

health sciences and complementary medicine. As at 2Q12, IMU had

more than 3,100 students enrolled and reported MYR40.4m in

revenues and about MYR18m in EBITDA. IMU’s main campus is

located at Bukit Jalil in Kuala Lumpur, Malaysia, and its main clinical

school is at Seremban, Negeri Sembilan, Malaysia. The clinical school

is supported by smaller clinical schools in Kuala Pilah, Negeri Sembilan

and in BatuPahat, Johor.

Parkway Life REIT. IHH owns a 35.8% equity interest in Parkway Life

REIT (PLife REIT), listed on the SGX. Its three PPL hospital properties

in Singapore – Gleneagles Hospital, Mount Elizabeth Hospital and

Parkway East Hospital – are owned by PLife REIT; PPL leases the

properties from it. In addition, IHH also owns a 100% equity interest in

Parkway Trust Management, the manager of PLife REIT. IHH is entitled

to PLife REIT’s distributions and to 100% of its management fees. PLife

REIT owns 36 properties with a carrying book value of SGD1.5b as at

Mar 2012.

Apollo Hospitals. IHH also owns an 11.2% equity interest in Apollo.

Apollo is one of India’s largest private healthcare providers and is listed

on the Bombay Stock Exchange and the National Stock Exchange of

India. A new 450-bed Gleneagles Khubchandani Hospital, located in

Mumbai, is scheduled to open by end 2012.



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Size has its advantages

Creating synergies and efficiencies. There are several advantages to

having scale in the healthcare industry. For IHH, the opportunities for

synergies and better efficiencies include:

(1) Better pricing and efficiency in sourcing and procuring medical

supplies,

(2) More effective marketing efforts,

(3) Stronger cross referrals across its hospital networks,

(4) Strong ability to attract and retain healthcare professionals, and

(5) Streamlined administrative functions.

These advantages were proven in the integration between Parkway and

Pantai, which saw savings of about MYR115m between Apr and Dec

2011, due to the synergies created.

Expansion plans and hospital beds ramp-up. IHH is not stopping at

its current size. It has several expansion plans already in the pipeline,

which would see its number of licensed beds grow by more than 3,400

beds to more than 8,300 by 2015 (+69%). Other than strengthening its

presence in its key current home markets of Singapore, Malaysia and

Turkey, IHH also has several expansion plans in various attractive

markets such as India, Hong Kong, PRC and the CEEMENA region.

Figure 22: Hospital bed additions in the pipeline

Beds Addition FY12 FY13 FY14 FY15

Singapore 180 153 0 0

Mount Elizabeth Novena Hospital 180 153

Malaysia 188 0 300 650

Gleneagles Medical Centre Penang 188

Gleneagles Medini 300

Pantai Hospital KL 120

Pantai Hospital Manjung 100

Gleneagles KL 100

Pantai Hospital Klang 80

Gleneagles Kota Kinabalu 250

Turkey 235 34 330 120

Acibadem Ankara Hospital 78

AcibademBodrum Hospital 76 34

AcibademSistina Skopje Clinical Hospital 81

AcibademMaslak Hospital 120

Two potential hospital development projects 330

India 450 0 0 0

Gleneagles Khubchandani Hospital 450

Hong Kong 0 313 0 0

Bidding for landmark greenfield hospital sites 313

PRC 0 0 450 0

SIMC 450

Total 1053 500 960 890

Source: Company, Maybank-KE



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Figure 23: Growth in hospital beds in the next 5 years

Source: IPO Prospectus, Maybank-KE

Well positioned to capture medical tourism market. With its

integrated network and dominant market positions in Singapore,

Malaysia and Turkey, IHH is well placed to capture the medical travel

market. Its strategic positioning puts it within a 4- to 8-hour flight radius

of key medical travel markets. The medical tourism hubs also have

special niches which cater to specific segments of medical travellers.

Figure 24: Strategically located to tap on medical tourism market




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Figure 25: Medical tourism niches of key countries

Country Capability to perform complex procedures (relative to other medical travel hubs in region

Price Benchmark

(Avg cost of selected surgeries in USD)

Diversity of patients (Top countries)

JCI

Accredited Hospitals

Singapore

High Key treatments: Cardiology, Cardio-thoracic surgery, Orthopaedics surgery, Reconstructive

surgery and Oncology

Coronary Artery Bypass Graft (CABG): 20,000 Hip replacement: 11,000

Rhinoplasty: 4,375

Indonesia > 47.0%

Malaysia 14.0% Russia, Vietnam > 4.0% each Middle East, Europe, Korea

>3.5% (each) North America >1.0%

14

Malaysia

Medium-High

Key treatments: Cardiology, Cardio-thoracic surgery, Orthopaedics surgery, In-vitro fertilisation (IVF), Reconstructive surgery, and dental related

treatment

CABG: 9,000 Hip replacement: 10,000 Rhinoplasty: 2,083

Indonesia 75.0%

Singapore/Middle East/Others 21.0% India 4.0%

6

Turkey

High

Key treatments: Ophthalmology, Dental Orthopaedic, Cardiology, Reconstructive surgery, Oncology, and Neurosurgery

CABG: 10,000 Hip replacement: 10,750 Rhinoplasty: 3,500

Germany 39.0% Holland 8.0%

Austria 5.0% Azerbaijan, Russia, Iraq, France 3.0% (each)

Belgium 2.0%

38

Thailand Medium-High

Key treatments: Botox and face lift

CABG: 13,000

Hip replacement: 12,000 Rhinoplasty: 2,500

UAE > 40.0% Qatar 9.0%

Oman 6.0% Japan, Myanmar >5.0%

13




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Financials

Strong and stable revenue growth. Underpinned by solid demand

fundamentals in the healthcare sector, IHH experienced strong revenue

CAGR of 15.9% between 2009 and 2011, while EBITDA grew by CAGR

of 16.6% over the same period. We believe that demand for healthcare

services will continue to be robust given positive structural demand

factors. IHH’s revenue base is now larger with the acquisition of the

60% interest in Acibadem. The growth in demand, coupled with IHH’s

bed additions from its expansion plans, will drive an expected revenue

and recurring PATAMI CAGR of 16% and 38% respectively over FY12F

to FY16F. We also expect increasing revenue intensity at most of its

hospitals as it takes on more complex cases.

Differences in revenue models. A key point to note is that Acibadem’s

revenue is accounted for on a gross basis (inclusive of doctor

consultation fees), while PPL’s revenue is accounted for on a net basis.

Most medical practioners in Singapore and Malaysia are independent

and buy or lease spaces from PPL. PPL will only bill patients on

hospital services and not on consultation fees. In contrast, most doctors

in Acibadem are under a full or part-time employment contract and

operate under a revenue-sharing model with Acibadem.

Segmental breakdown based on geography. Based on 1H12 figures,

the bulk of IHH’s revenue share came from Acibadem Holding and

PPL’s Singapore operations. Acibadem operates mainly in Turkey and

its patients come from the CEEMENA region. In terms of EBITDA,

Singapore accounted for the bigger share although EBITDA from

Acibadem is a close second. Malaysia operations accounted for the

third biggest share in terms of both revenue and EBITDA.

Figure 26: 1H12 Revenue breakdown by geography Figure 27: 1H12 EBITDA breakdown by geography

Source: IPO Prospectus, Maybank-KE Source: IPO Prospectus, Maybank-KE

Turkey operations ramping up. Acibadem has been loss-making at

the net profit level prior to and including FY11, although it was profitable

at the EBITDA level. In FY11, Acibadem reported a net loss of

MYR220.7m, dragging down IHH’s pro-forma PATAMI to only

MYR245.7m. This was partly related to unrealized forex losses due to

1H12

EBITDA

1H12

Revenue



Page 1 of 2

unfavourable currency movements. A significant amount of Acibadem’s

debt was in USD and other foreign currencies, which strengthened

against the Turkish Lira in 2011. However, we believe the losses were

largely due to several Acibadem hospitals being in the ramping-up

phase. For 1H12, Acibadem showed a positive profit of MYR12.5m.

Going forward, we do expect Acibadem to contribute positively to IHH’s

overall profit in FY12 and beyond.

Efficiency gains from size. IHH would also see some efficiency gains

from synergies in its operations; we expect this to manifest as an

improvement in operating margins, as operational expenses as a

percentage of revenue trend down. We therefore expect to see EBITDA

on a rising trend, especially on FY13F onwards where there is no more

recognition from the sales of its medical suites in Mount Elizabeth

Parkway Novena Hospital. We project EBITDA margins of 21.4% in

FY12F and 22.1% in FY13F (FY11A: 21.1%).

Figure 28: Margins estimates Figure 29: 1H12 Cost Structure (exc development)

1047

575

249

289

171132

1H12

Operating lease expenses

Depreciation &Amortisation

Other op. costs

Purchased & contractedservices

Inventories & consumables

Staff costs

Source: Company, Maybank-KE Source: Company, Maybank-KE,

Recognition of sales of medical suites. The total proceeds from the

sales of the medical suites in Mount Elizabeth Novena Hospital was

MYR1,210m (SGD487m), which was recognized in 2Q12. This

contributed MYR238m in EBITDA and an estimated MYR304m in net

profit in the same period. From FY13 onwards, this will cease to be a

feature of profitability.

Operating lease expenses. IHH leases some of its hospital facilities.

The three hospital properties in Singapore which it leases from Parkway

Life REIT accounted for a majority of its operating lease expenses of

MYR132.1m in 1H12. However, PPL also owns 35.8% of Parkway Life

REIT and is therefore entitled to part of its distribution yield. EBITDA

margins for its PPL Singapore, at 18.9% in 1H12, therefore appear to

be lower relative to the overall Group’s 21.0%.

The Singapore leased properties are under Master Lease Agreements,

in which the rent payable is based on the higher of (i) aggregate of a

base rent and a variable rent tied to 3.8% of the hospital’s adjusted

revenue; and (ii) total rent paid in preceding year, adjusted for growth in

the Singapore CPI plus 1% of such total rent paid in the preceding year.

1H12 results. 1H12 revenue rose by 137% YoY while corresponding

PATAMI showed a 197% YoY increase. This was mainly due to the

recognition from sales of the medical suites in Mount Elizabeth Novena

Hospital. Excluding this, revenue rose by 65% YoY while corresponding

PATMI rose by 35% YoY. This was due to maiden contributions from

37.9%

20.8%

9.0%

10.5%

6.2%

4.8%

% of revenue

89.1 Total



Page 1 of 2

Acibadem, as well as increases in inpatient admissions and higher

average revenue per patient day in PPL’s Singapore and Malaysia

operations. Excluding Acibadem, PATAMI still rose a healthy 28%

during the same period.

Figure 30: 1H12 results

% chg

Income Statement (MYR m) 1H12 1H11 YoY Remarks

Revenue 3,973.7 1,675.9 137.1 Includes sale of medical suites MYR1,209.6m

Inventories and consumables (574.7) (349.9) 64.3 Purchased and contracted services (249.3) (206.8) 20.5 Staff cost (1,046.8) (540.1) 93.8 Rental of premises (132.1) (89.6) 47.4 Other Op. Income 200.2 91.9 117.8

Other Op. Expenses (288.7) (191.3) 50.9

Development cost (971.2) 0.0 nm EBITDA 911.0 390.1 133.5

Depreciation (171.1) (78.0) 119.4 Higher depreciation from ramp-up of hospitals

Amortisation (32.6) (38.2) -14.8

EBIT 707.3 273.9 158.2 Finance Income 39.5 10.9 263.6

Interest Expense (102.4) (73.8) 38.7 JV Income 7.7 7.3 5.9

Associates Income 25.9 23.7 9.6

EBT 678.1 241.9 180.3 Taxation (122.3) (54.6) 123.9

Net Profit 555.8 187.3 196.8 Minority Interest (28.4) (8.7) 225.1

PATAMI 527.4 178.5 195.4 Includes sale of medical suites MYR193.6m


Paring down its debt. 90.9% of the gross IPO proceeds has gone

towards paring down the MYR957m and MYR3,706m of term loan

facilities which were taken respectively for the acquisition of Acibadem

Group and the privatisation of Parkway. This has improved IHH’s

gearing significantly, from 51% net-debt/equity (450% net-debt/NTA) as

at 30 June 2012 to 7% net-debt/equity (24% net-debt/NTA). We

estimate the reduction in debt would also result in yearly interest

savings of about MYR120m.

Figure 31: Reduction in net debt/ NTA

0.51

4.5

0.07 0.24

Net debt/ Equity Net debt/ NTA

Jun-12 Post-IPO


Much of its planned capex has been spent. IHH has already incurred

about 75% of its planned MYR6.5b expansion, including MYR3.3b in

land cost. The total outstanding expansion capex expected to be

incurred from 2H12 to FY15 is about MYR1.74b. Overall capex should

therefore trend lower towards our estimated yearly maintenance capex

of about MYR400m after FY15F. Barring any significant additional

capex, we estimate that yearly free cashflows would be sustained

above the MYR1b level from FY14F.



Page 1 of 2

Figure 32: Capex plans

Expansion capex

Country Hospital No. of Beds Completion FY12 FY13 FY14 FY15

Singapore Mount Elizabeth Novena Hospital 333 2012 514

Malaysia Gleneagles Medical Centre Penang 188 end 2012 57 43

Pantai Hospital KL 120 end 2014 46 76 76

Gleneagles Medini 150 - 300 end 2014 46 174 174

Gleneagles KL 100 mid 2015 0 8 8 8

Pantai Hospital Klang 80 mid 2014 6 22 22

India Gleneagles Khubchandani Hospital 450 end 2012 220 27

Turkey Acibadem Ankara Hospital 78 3Q 2012 70

AcibademBodrum Hospital 76 - 110 2012 - 2013 48 26

AcibademSistina Skopje Clinical Hospital 81 end 2012 14

AcibademMaslak Hospital 120 2014 30 63 63

Budgeted capex 2014 73 82 82

Total Expansion capex 1,124 522 426 8

Maintenance capex

Singapore & Malaysia

General 292 250 250 250

Turkey General 178 150 150 150

Total Maintenance capex 470 400 400 400

Total capex 1,594 922 826 408

Source: Company, Maybank KE estimates

Large amount of goodwill and intangibles on its books. IHH has a

large amount of goodwill and intangibles on its books as a result of its

acquisitions. The total amount of goodwill as at 2Q12 was MYR8.7b,

with another MYR3.0b in intangibles. After adjusting for goodwill and

intangibles, NTA works out to be MYR5.0b or MYR0.62 per share.



Page 1 of 2

Figure 33: Breakdown of revenue, EBITDA and EBITDA margin forecasts

FY11 FY12F FY13F FY14F

Revenue (MYR m) Hospitals

Singapore 1,180 1,411 1,885 2,121 Malaysia 922 1,038 1,173 1,281

Turkey 1,703 2,159 2,395 2,623 International 67 130 400 670

Total 3,872 4,738 5,853 6,694

Healthcare

Singapore 710 778 855 941 Malaysia 29 50 55 60

Turkey 243 159 174 192 Others 143 164 181 199

Total 1,126 1,150 1,265 1,392

Education IMU 157 169 188 203 Others 14 12 16 20

Total 171 181 204 223

Non-Healthcare 22 24 28 32 Sale of Medical Suites 1,210 - -

Total Revenue 5,191 7,303 7,350 8,341

EBITDA (MYR m) Hospitals

Singapore 180 235 320 371 Malaysia 222 252 293 327 Turkey 344 481 551 616 International 16 29 93 161

Total 761 997 1,258 1,475

Healthcare Singapore 109 135 150 165 Malaysia 15 23 26 28 Turkey 36 39 35 38 International 50 34 54 60

Total 210 230 264 291

Education

IMU 61 68 75 81 Others 9 8 10 12

Total 70 76 85 93 Non-Healthcare -12 19 14 16 Sale of Medical Suites 238 - -

Total EBITDA 1,030 1,561 1,621 1,875

EBITDA Margins (%) Hospitals

Singapore 15.2% 16.7% 17.0% 17.5% Malaysia 24.1% 24.3% 25.0% 25.5% Turkey 20.2% 22.3% 23.0% 23.5% International 23.1% 22.5% 23.4% 24.0%

Total 19.7% 21.0% 21.5% 22.0%

Healthcare Singapore 15.3% 17.4% 17.5% 17.5%

Malaysia 52.4% 46.2% 46.6% 47.0% Turkey 14.8% 24.4% 20.0% 20.0% International 34.8% 20.5% 30.0% 30.0%

Total 18.7% 20.0% 20.9% 20.9%

Education IMU 39.0% 40.2% 40.0% 40.0%

Others 64.9% 69.7% 60.0% 60.0%

Total 41.1% 42.2% 41.6% 41.8% Non-Healthcare -53.4% 78.7% 50.0% 50.0%

Sale of Medical Suites 19.7%

EBITDA Margin 19.8% 21.4% 22.1% 22.5%




Page 1 of 2

Figure 34: Key hospital operating data and assumptions used in forecasts

FY09 FY10 FY11 FY12F FY13F FY14F FY15F FY16F

Singapore

No. of hospitals 3 3 3 4 4 4 4 4

No. of licensed beds 1,008 743 730 910 1,063 1,063 1,063 1,063

No. of operational beds 724 714 716 907 1,060 1,060 1,060 1,060

Inpatient admissions 46,961 49,182 51,036 56,794 74,451 79,288 82,680 88,192

Avg length of stay 3.4 3.3 3.3 3.3 3.3 3.3 3.3 3.3

Occupancy 60.0% 62.0% 64.0% 56.6% 63.5% 67.6% 70.5% 75.2%

Avg revenue per patient day (SGD) 1,962 2,091 2,275 2,464 2,593 2,722 2,858 3,001

Avg revenue per patient day (MYR) 4,709 5,018 5,460 5,950 6,275 6,587 6,916 7,263

Malaysia (Hub and Spoke)

No. of hospitals 11 11 11 12 12 13 18 18

No. of licensed beds 1,993 1,993 2,010 2,213 2,213 2,513 3,163 3,163

No. of operational beds 1,781 1,835 1,878 2,099 2,099 2,399 3,049 3,049



Occupancy 64.2% 65.1% 63.0% 59.7% 65.4% 59.4% 56.7% 68.3%

Avg revenue per patient day (SGD) 482 542 583 614 642 674 709 744


Turkey

No. of hospitals 9 11 14 17 17 19 20 20

No. of licensed beds 1,232 1,473 1,751 2,036 2,070 2,400 2,520 2,520

No. of operational beds 1,232 1,473 1,751 2,036 2,070 2,400 2,520 2,520



Occupancy 54.9% 66.5% 79.5% 51.2% 55.4% 50.7% 57.2% 62.2%

Avg revenue per patient day (SGD) 1,085 1,136 1,133 1,287 1,347 1,415 1,485 1,560


IMU

Total programmes offered 14 15 17 18 18 18 18 18

Total student enrolment 2,631 2,928 2,963 3,195 3,400 3,500 3,600 3,700

Source: IPO Prospectus, Maybank-KE estimates 1 Reflects 3 hospitals opened in 2009 that were ramping up and not operational for the full year

2 Comprises data for only 11 hospitals as 3 hospitals were only acquired in 2H11, where the operational data were recorded and classified

differently with the rest of the other existing hospitals.



Page 1 of 2

Valuation

PER-to-growth (PEG) valuation. We value IHH at MYR3.15 per share,

pegged to 1x PEG (38x FY13F PER). We choose the PEG valuation

method to take into account the growth potential that would come from

IHH’s expansion plans. The positive earnings impact from these

expansion plans would only materialise in the next 3-5 years, but IHH

has already incurred 75% of the total expansion capex. We forecast

recurring EPS to grow by a CAGR of 38% p.a over the next five years.

Figure 35: Peer Comparison

TP

Mkt Cap Price PER (x) PEG EV/EBITDA (x) P/B ROE

Net Gearing DivYld

Company Rating (lcl) USD b (lcl) Y-1 Y Y+1 (x) Y Y+1 (x) (%) (%) (%)

Asia-listed

Raffles Medical SGD BUY 2.71 1.13 2.54 25.9 25.1 20.8 1.7 17.7 15.4 3.8 16.2 (8.4) 1.6

Apollo Hospitals INR N.R. N.A. 1.97 750.45 44.6 34.0 27.3 1.5 17.3 14.1 4.0 10.0 15.7 0.5

Fortis Healthcare INR N.R. N.A. 0.80 105.20 59.0 na 43.8 na 15.2 12.6 1.3 2.2 149.1 na

Bangkok Dusit THB N.R. N.A. 5.28 105.00 24.2 26.7 24.8 1.0 18.3 16.4 4.8 18.4 37.0 1.0

Bumrungrad THB N.R. N.A. 1.86 78.25 29.8 25.7 25.2 1.3 18.0 16.3 7.8 24.8 54.9 1.6

KPJ Healthcare MYR HOLD 5.79 1.28 6.12 24.8 25.1 21.9 1.6 14.8 12.8 3.9 17.3 19.2 2.0

Ramsay Health Care AUD N.R. N.A. 4.86 24.61 21.8 18.5 16.5 1.4 9.5 8.7 4.2 20.4 63.7 3.5

Average 32.9 25.8 25.7 1.4 15.8 13.8 4.3 15.6 47.3 1.7

Global-listed

Tenet Healthcare USD N.R. N.A. 2.47 23.67 15.6 10.8 8.8 1.0 5.8 5.5 2.2 4.6 281.6 na

LifePoint Hospitals Inc USD N.R. N.A. 2.02 41.39 11.6 12.3 11.1 1.3 6.2 5.8 1.0 8.5 74.1 na

Health MgmtAssociates USD N.R. N.A. 1.96 7.64 10.2 8.8 7.8 0.7 5.7 5.5 1.8 21.1 343.8 na

Community Health Systems USD N.R. N.A. 2.55 28.01 5.8 7.5 7.0 0.6 6.3 6.1 1.0 8.8 304.8 na

Universal Health Services USD N.R. N.A. 4.39 45.33 11.3 10.5 9.4 0.9 6.6 6.2 1.7 18.6 140.8 0.4

HCA Holdings USD N.R. N.A. 13.62 30.92 9.0 8.5 8.2 0.8 6.4 6.2 na na na na

Average 10.6 9.7 8.7 0.9 6.2 5.9 1.5 12.3 229.0 0.4

Source: Bloomberg, Maybank-KE

Sum-of-the-parts (SOTP) valuation. As a cross-check, we also use an

SOTP methodology to value IHH’s individual core businesses. We

value PPL, Acibadem and IMU using an EV/EBITDA relative valuation

and adopt market values for IHH’s stakes in listed entities, Parkway Life

REIT and Apollo. Our SOTP-based value comes up to MYR2.96 per

share.

We believe that IHH deserves a premium valuation for the following

reasons, and have therefore assigned an above-average EV/EBITDA

multiple on PPL:

1. Being one of the largest listed healthcare groups in the world, IHH

has strong bargaining power with suppliers and would also benefit

from higher operational efficiency;

2. Its premium branding attracts high-profile healthcare professionals,

who in turn would attract patients seeking the best treatments to its

hospitals, resulting in higher revenue intensity than other competing

hospitals;

3. It has already mapped out an expansion plan which would see bed

capacity increase by more than 3,400 to more than 8,300 by 2015,

from 4,900 currently.



Page 1 of 2

Figure 36: SOTP Valuation

Valuation Equity Value Per Share

Stake Basis (MYR m) (MYR) Remarks

PPL 100.0% 18x FY13F EV/EBITDA 17,281 2.14 Premium to peer-average

Acibadem 60.0% 14x FY13F EV/EBITDA 4,921 0.61 Peer average

IMU 100.0% 14x FY13F EV/EBITDA 1,052 0.13 Peer average

Parkway Life REIT 35.8% Mkt Value 1,088 0.13

Apollo 11.2% Mkt Value 702 0.09

Enterprise Value (MYR m) 25,043 3.11

Net cash/(debt) (1219) (0.15)

Equity Value (MYR m) 23,824 2.96

No. of shares (m) 8,057

Value per share (MYR) 2.96

Source: Maybank-KE



Page 1 of 2

Key risks

Changes in regulations and policies. IHH operates its healthcare

businesses in various countries and is subject to the respective

regulations in the operating markets. Hence, any unfavourable changes

in the regulations and policies by local governments may affect IHH’s

businesses adversely.

Fluctuations in currencies. A large portion of IHH’s businesses are

located outside of Malaysia. Other major operating markets include

Singapore and Turkey, where earnings are denominated in SGD and

TRY respectively. As such, any adverse movements in the local

currencies against MYR will result in translation impacts to the

consolidated financial statements, which are denominated in MYR.

Competition both locally and regionally. Competition may be intense

if there are substantial increases in investments in local healthcare

infrastructure (bed capacities of public hospitals) by local governments.

Additionally, there is also increasing competition from neighbouring

countries. For instance, Thailand, which has a strong position as a

medical hub in Asia, could also attract Singaporean, Indonesian and

Malaysian patients.

Execution risks in expansion plans. Given its aggressive growth

plans, IHH faces huge execution risks in delivering on its planned

expansions. In the event that it fails to execute on the intended

expansion plans, its future earnings and our forecasts could be

materially affected. In addition, given that new hospital projects

normally have a gestation period, IHH may take 2-5 years to reach its

intended operating levels. Other risks include ability to attract and retain

healthcare professionals and higher startup costs than expected.



Page 1 of 2

FINANCIAL STATEMENTS AND RATIOS

PROFIT AND LOSS (MYR m) Pro-forma CASH FLOW (MYR m) Pro-forma

FYE Dec 2011 2012F 2013F 2014F FYE Dec 2011 2012F 2013F 2014F

Sales 5,190.8 7,306.5 7,350.0 8,340.8 Operating cash flow 1,356.0 2,934.2 1,502.9 2,062.1

Inventories and consumables (1,025.2) (1,231.6) (1,455.3) (1,651.5) Net Profit before minorities 132.0 965.0 898.7 1,097.1

Purchased and contracted services

(624.9) (757.0) (859.1) (989.1) Depreciation &Amortisation

463.8 507.8 522.0 551.5

Staff cost (2,310.7) (2,793.0) (3,169.5) (3,649.2) Change in Working Capital 386.1 1,714.6 (60.2) 236.5

Rental of premises (263.7) (264.0) (264.0) (264.0) Others 374.1 (253.3) 142.4 177.0

Other op. inc/(exp) (1,095.8) (459.7) (521.7) (589.3) Investment cash flow (2,267.3) (1,409.4) (755.9) (624.4)

EBITDA 1,094.0 1,561.4 1,621.0 1,875.0 Net Capex (845.0) (1,593.7) (922.1) (826.1)

Dep&amort. (441.6) (507.8) (522.0) (551.5) Net Investments (1,472.7) 0.0 0.0 0.0

Operating Profit 652.4 1,053.6 1,099.0 1,323.5 Change in other assets 50.4 184.3 166.2 201.7

Net Interest (526.5) (47.6) (38.0) (12.1) Financing cash flow 1,324.3 58.6 (88.2) 26.6

Interest Income 58.3 134.9 110.4 142.3 Change in share capital 7,265.9 5,040.0 0.0 0.0

Interest Expense (584.8) (182.5) (148.4) (154.4) Dividends paid (5.1) 0.0 0.0 0.0

Net Investment income/(loss) 0.0 0.0 0.0 0.0 Net change in debt (5,107.3) (4,799.0) 60.2 181.0

Net other non-op. JV+Assc. 93.8 69.7 76.4 80.8 Change in other LT liab. (829.2) (182.5) (148.4) (154.4)

Net exceptionals 0.0 112.4 0.0 0.0 Net cash flow 413.0 1,583.3 658.8 1,464.3

Pretax profit 219.8 1,188.1 1,137.4 1,392.2 Free cash flow 511.0 1,340.5 580.8 1,236.0

Income taxes (87.8) (223.2) (238.7) (295.1)

Minority Interest 113.6 (162.3) (235.7) (285.3)

Net Profit 245.7 802.7 663.0 811.9 KEY RATIOS

Recurring Net Profit 245.7 498.5 663.0 811.9 FYE Dec 2011 2012F 2013F 2014F

EPS (sen) 3.0 10.0 8.2 10.1 Growth (% YoY)

Recurring EPS (sen) 3.0 6.2 8.2 10.1 Sales 15.2 40.8 0.6 13.5

EBIT 79.5 61.5 4.3 20.4

EBITDA 33.8 42.7 3.8 15.7

BALANCE SHEET (MYR m) Pro-forma Net profit 218.5 630.8 (6.9) 22.1

FYE Dec 2011 2012F 2013F 2014F EPS 212.1 226.7 (17.4) 22.5

Total Assets 23,020.3 24,925.9 26,139.2 28,128.6 Profitability (%)

Current Assets 3,892.5 4,590.2 5,326.9 6,961.0 Gross Margin 69.1 75.1 69.9 69.9

Cash & ST investment 1,768.2 3,351.6 4,010.3 5,474.6 EBITDA Margin 21.1 21.4 22.1 22.5

Inventories 117.9 140.1 151.5 172.0 EBIT Margin 12.6 14.4 15.0 15.9

Accounts receivable 814.2 1,040.9 1,107.5 1,256.8 Net Margin 4.7 11.0 9.0 9.7

Others 1,192.2 57.5 57.5 57.5 ROA 1.3 3.3 2.6 3.0

Non-current Assets 19,127.9 20,335.7 20,812.3 21,167.7 ROE 2.6 4.8 3.7 4.3

LT investments 1,458.8 1,551.5 1,627.9 1,708.7

Net PPE 6,044.2 7,201.8 7,673.9 8,020.5 Stability

Others 11,624.9 11,582.5 11,510.5 11,438.5 Total Debt/Equity (X) 0.2 0.2 0.2 0.2

Net Debt/Equity (X) 0.1 net cash net cash net cash

Total Liabilities 6,123.7 6,931.9 7,010.7 7,617.8 Int. coverage (X) 1.1 5.8 7.4 8.6

Current Liabilities 2,428.9 3,355.0 3,386.7 3,819.3 Int. & ST debt coverage (X)

0.8 2.4 2.6 3.0

Accounts payable 2,019.2 2,922.6 2,940.0 3,336.3 Cashflow int. coverage (X) 2.3 16.1 10.1 13.4

ST borrowings 246.6 259.0 272.5 289.0 Cashflow int. & ST debt (x) 1.6 6.6 3.6 4.7

Others 163.0 173.4 174.2 194.0 Current Ratio (X) 1.6 1.4 1.6 1.8

Long-term liabilities 3,694.9 3,576.9 3,624.0 3,798.4 Quick Ratio (X) 1.6 1.3 1.5 1.8

Long-term debts 2,797.3 2,678.6 2,725.2 2,889.8 Net debt/(cash) (MYR m) 1,275.7 (414.0) (1,012.6) (2,295.9)

Others 897.6 898.3 898.7 908.6

Per share data (sen)

Shareholder's equity 16,304.6 17,269.5 18,168.2 19,265.4 EPS 3.0 10.0 8.2 10.1

Paid-in capital 16,029.0 16,029.0 16,029.0 16,029.0 Recurring EPS 3.0 6.2 8.2 10.1

Reserve 275.6 1,240.6 2,139.3 3,236.4 CFPS 16.8 36.4 18.7 25.6

Minority Interest 592.1 724.5 960.2 1,245.5 BVPS 202.4 214.3 225.5 239.1

Total Equity 16,896.6 17,994.0 19,128.5 20,510.8 SPS 64.4 90.7 91.2 103.5

Total Equity & Liabilities 23,020.3 24,925.9 26,139.2 28,128.6 EBITDA/Share 13.6 19.4 20.1 23.3

DPS 0.0 0.0 0.0 0.0

Source: IPO Prospectus, Maybank KE estimates



Page 1 of 2

Appendix I: Key management profiles

Figure 37: Director's profiles

Name Board Position Age Background

Tan Sri Dato' Dr Abu Bakar Suleiman

Chairman of IHH, President and CEO of

IMU

68 He has c.19 years of healthcare industry experience. He was a consultant nephrologist and head of the Department of Nephrology at Hospital Kuala

Lumpur. He developed the nephorology and dialysis services at Hospital Kuala Lumpur and in other hospitals around Malaysia. In 1987, he joined MOH Malaysia as the Director of Medical Services. In 1989, he was the

Deputy Director General of Health and in 1991, he was appointed as the Director General of Health. He was appointed President of IMU in 2001. He holds an MBBS from Monash University and obtained a Masters of

Medicine (Internal Medicine) from the University of Singapore. He attended the Advanced Management Programme at Harvard Business School in 1991.

Dr Lim Cheok Peng Managing Director of IHH and Vice Chairman of PPL

65 He has c.25 years of healthcare industry experience, as a medical practitioner and in managing hospital businesses. He spearheaded the redevelopment of Gleneagles Hospital in Kuala Lumpur, Gleneagles

Hospital in Jakarta, Gleneagles Hospital in Medan and Gleneagles Hospital in Kolkata. In 1987, he began his career in Parkway as CEO, became MD in 2000 and Vice Chairman in 2009. In 2011, he joined IHH as Executive

Director. He holds an MBBS and Masters of Medicine (Internal Medicine) from the University of Singapore. He is also a Fellow of the Royal College of Physicians of the United Kingdom and later became a Fellow of the Royal

College of Physicians and Surgeons of Glasgow and Edinburgh.

Dr Tan See Leng Executive Director of IHH

and Managing Director and Group CEO of PPL

47 He has c.20 years of healthcare industry experience. In 2004, he joined

Parkway as COO of Mount Elizabeth Hospital and was subsequently appointed Senior Vice President, International Operations in 2006, and later seconded to Pantai as CEO of the Hospitals Division. In 2010, he was

appointed MD and CEO of Parkway and was concurrently appointed MD of Parkway Pantai in 2011. He holds an MBBS and Master of Medicine (Family Medicine) from the National University of Singapore. He also has a

Master of Business Administration from the University of Chicago - Booth School of Business.

Ahmad Shahizam Md Shariff Director of IHH, Head of Business Development &

Investor Relations of IHH and Executive Director of Corporate Service of PPL

41 He began his career with HSBC, Kuala Lumpur in 1994 and joined ING Barings Bank in Kuala Lumpur in 1996. Subsequently, he joined Citigroup,

Salmon Smith Barney as Vice President of Equity Research. In 2004, he joined Khazanah in the MD's office and eventually held the position of Director of Investments responsible for all investments in the healthcare and

power sectors, including company monitoring and engagement as well as leading value creation plans and related transactions. He was appointed Executive Director of PPL in 2010. He holds a Bachelor of Laws (Hons)

from the London School of Economics and Political Science, University of London and obtained a Masters in Public Administration from Harvard University, U.S.

Mehmet Ali Aydinlar Executive Director of IHH, Chairman and CEO of Acibadem Holding

55 He has c.20 years of healthcare industry experience. He started his career in 1981 as a Public Accountant. As an entrepreneur with extensive management experience, he has been involved in the healthcare sector

with Acibadem Group since 1993. He holds a business administration degree from Galatasaray Economy and Management Business College and an honorary doctorate degree from Dumplupinar University, Institute of

Social Sciences.

Dr Lim Suet Wun Executive Vice President of Singapore Operations,

of Parkway Healthcare

52 He has c.25 years of healthcare industry experience. He began his career as a house officer in the MOH Singapore and subsequently became a

Medical Officer in the Singapore Armed Forces. In 1991, he was appointed COO of KK Women and Children's Hospital and in 1995 became the CEO of National University Hospital. In 2001, he joined Tan Tock Seng Hospital

as CEO and in 2004 became the CEO of the National Healthcare Group Singapore. He was appointed Head of Singapore Operations Division of Parkway Pantai in 2011. He holds an MBBS from the National University of

Singapore and Master of Public Health and Master of Business Administration degrees from the University of California, U.S.



Page 1 of 2

Name Board Position Age Background

Tan See Haw Group CFO of PPL 55 Joined Parkway in 2009. Upon Parkway's acquisition by Parkway Pantai in 2011, he was appointed Group CFO of PPL. Prior to his appointment with

PPL, he was the VP of IT and Supply Chain of Unisem (M) Bhd from 2007-2008. He has held key regional positions in major corporations such as Advanced Interconnect Technologies, Asia Pacific Breweries Ltd and Pepsi-

Cola International. He holds a Bachelor of Accountancy from the National University of Singapore. He is also a Fellow of Institute of the Certified Public Accountants of Singapore.

Murat Yalcin Nak Deputy General Manager of Acibadem (Regional Operations and

Marketing)

47 He has c.7 years of healthcare industry experience. Before joining Acibadem in 2008, he worked in Procter & Gamble Turkey (as Planning Engineer), Procter & Gamble Germany (as Assistant Brand Manager and

Planning Group Manager), McKinsey & Co. in Turkey and Switzerland (as Senior Engagement Manager) and PwC (as consultant). His final post before joining Acibadem, was serving from 2005-2008 as the CEO and

Board Member of Memorial Healthcare in Turkey. He holds a Masters in Business Administration from Northwestern University's J. L. Kellogg School of Management, U.S.

Rengin Yigitbas Akillioglu Deputy General Manager, CFO and Board Secretary of Acibadem

47 She began her career at NASAS Aluminium Inc. in Istanbul, Turkey in 1987 and worked with Turkish Airlines Inc. (THY) during 1989-2010 in various positions in management and finance, the last being CFO of THY. She has

been working as CFO, Coordinator USA and the board secretary at Acibadem since 2010. She holds a B.Sc. in Management Engineering from Istanbul Technical University and a Master's Degree in Economics from

Bogazici (Bosphorus) University, Turkey.




Page 1 of 2

Appendix II: Hospital Assets, Networks and Key Operating Data

Figure 38: IHH's existing hospital network

Hospital Country Accreditation Specialist areas Licensed beds

Operating theatres

1 Mount Elizabeth Hospital Singapore JCI Cardiothoracic vascular surgery, neurosurgery, general surgery kidney transplantation, hematopoietic stem

cell, transplantation, orthopedics, cardiology, oncology

345 13

2 Gleneagles Hospital Singapore JCI Cardiology, gastroenterology, liver transplantation, obstetrics &

gynaecology, oncology, orthopedics

272 12

3 Parkway East Hospital Singapore JCI General surgery, paediatrics, obstetrics & gynaecology, cardiology, fertility services (including IVF)

113 5

4 Pantai Hospital Kuala Lumpur Malaysia JCI, MSQH Cardiology and cardiothoracic surgery,

orthopaedic, oncology, minimally invasive surgery, obstetrics and gynaecology, paediatric, trauma and 22

other specialties

332 8

5 Gleneagles Hospital Kuala Lumpur

Malaysia JCI, MSQH Cardiology and cardiothoracic surgery, neurosurgery, obstetrics and gynaecology, plastic surgery,

reconstructive and maxillofacial, orthopaedic, trauma surgery and 17 other specialties

316 8

6 Gleneagles Medical Center Penang

Malaysia MSQH Cardiology and cardiothoracic surgery, oncology, hand and microsurgery,

haematology, neurosurgery, nephrology, orthopaedic, urology and 18 other specialties

227 5

7 Pantai Hospital Ayer Keroh Malaysia MSQH Cardiology and cardiothoracic surgery,

oncology, nephrology, obstetrics and gynaecology, paediatrics, ophthalmology and 16 other specialties

224 7

8 Pantai Hospital Penang Malaysia MSQH ENT, neurology, neurosurgery, orthopaedic, cardiology and 15 other

specialties

195 5

9 Pantai Hospital Ipoh Malaysia - Cardiology and cardiothoracic surgery, orthopaedic and ophthalmology, haematology, obstetrics and

gynaecology, paediatrics and 14 other specialties

180 4

10 Pantai Hospital Cheras Malaysia MSQH ENT, general medicine, general surgery, obstetrics and gynaecology,

orthopaedic and 12 other specialties

143 4

11 Pantai Hospital Ampang Malaysia - ENT, general medicine, general surgery, obstetrics and gynaecology, orthopaedic and 10 other specialties

114 4

12 Pantai Hospital Klang Malaysia MSQH General medicine, general surgery, obstetrics and gynaecology,

orthopaedic, paediatric and 11 other specialties

108 3

13 Pantai Hospital BatuPahat Malaysia - General medicine, general surgery, obstetrics and gynaecology, orthopaedic, paediatric and 5 other

specialties

106 3

14 Pantai Hospital Sungai Petani Malaysia - General medicine, cardiology, general surgery, obstetrics and gynaecology,

orthopaedic and 8 other specialties

80 2



Page 1 of 2

Hospital Country Accreditation Specialist areas Licensed

beds

Operating

theatres

15 Acibadem Bursa Hospital Turkey - 25 therapeutic areas and key specialist services (including radiation oncology,

cardiovascular surgery, general surgery, obstetrics and gynaecology

195 6

16 AcibademMaslak Hospital Turkey JCI 30 therapeutic areas and key specialist services (including radiation oncology, cardiac care and urology)

183 8

17 AcibademBakirkoy Hospital Turkey JCI 25 therapeutic areas and key specialist services (including paediatric

cardiovascular surgery, orthopaedic and general surgery)

136 7

18 AcibademKadikoy Hospital Turkey JCI 25 therapeutic areas and key specialist services (including IVF, cardiology, paediatrics and internal medicine)

127 6

19 Acibadem Adana Hospital Turkey JCI 25 therapeutic areas and key specialist

services (including radiation oncology)

125 5

20 Acibadem Kayseri Hospital Turkey - 20 therapeutic areas and key specialist services (including radiation oncology)

119 6

21 International Hospital Turkey JCI 25 therapeutic areas and key specialist services (including organ transplantation and paediatric

cardiovascular surgery)

118 6

22 Acibadem Eskisehir Hospital Turkey - 20 therapeutic ares and key specialist services

109 5

23 Aile Hospital Bahcelievler Turkey - 25 therapeutic areas and key specialist services (including general surgery, orthopaedic, obstetrics and

gynaecology)

109 5

24 AcibademFulya Hospital Turkey Pending JCI 10 therapeutic areas and key specialist

services (including sports medicine)

100 6

25 Aile Hospital Goztepe Turkey - 20 therapeutic areas and key specialist services (including general surgery,

cardiology and cardiovascular surgery)

89 4

26 AcibademKozyatagi Hospital Turkey - 25 therapeutic areas and key specialist services, including adult and paediatric neurosurgery, medical oncology,

nuclear medicine

87 4

27 AcibademKocaeli Hospital Turkey JCI 25 therapeutic areas and key specialist

services (including paediatrics, internal medicine, ENT and cardiovascular surgery)

75 3

28 AcibademSistina Skopje Clinical Hospital

Macedonia Preparing for JCI

Cardiology, cardiovascular surgery, urology, obstetrics and gynaecology

179 8

29 Apollo Gleneagles Hospital

(50:50 JV with Apollo)

India JCI Cardiology, general surgery,

orthopaedic and transplants

425 -

30 Gleneagles JPMC Cardiac

Centre (75:25 JV with Brunei Investment Agency)

Brunei - Cardiac inpatient and outpatient

specialist services

21 2

Total 4,952 164




Page 1 of 2

Figure 39: Key operating statistics

2009 2010 2011 1Q12

Singapore

No. of hospitals 3 3 3 3

No. of licensed beds 1,008 743 730 730

No. of operational beds 724 714 716 719

Inpatient admissions 46,961 49,182 51,036 13,261

Avg length of stay 3.4 3.3 3.3 3.3

Occupancy 60.0% 62.0% 64.0% 67.0%

Avg revenue per patient day (SGD) 1,962 2,091 2,275 2,437

Avg revenue per patient day (MYR) 4,709 5,018 5,460 5,849

Malaysia (Hub and Spoke)


No. of licensed beds 1,993 1,993 2,010 2,025

No. of operational beds 1,781 1,835 1,878 1,911



Occupancy 64.2% 65.1% 63.0% 63.5%

Avg revenue per patient day (SGD) 482 542 583 609


Malaysia (Hub)






Occupancy 66.4% 68.0% 66.7% 65.6%



Malaysia (Spoke)


No. of licensed beds 534 534 551 551

No. of operational beds 469 489 519 519



Occupancy 58.0% 57.3% 53.4% 58.0%



Turkey






Occupancy 54.9% 66.5% 79.5% 78.1%

Avg revenue per patient day (SGD) 1,085 1,136 1,133 1,258


IMU

Total programmes offered 14 15 17 18

Total student enrolment 2,631 2,928 2,963 3,179




Page 1 of 2

RESEARCH OFFICES REGIONAL

P K BASU Regional Head, Research & Economics (65) 6432 1821 [email protected]

WONG Chew Hann, CA Acting Regional Head of Institutional Research

(603) 2297 8686 [email protected]

THAM Mun Hon, CFA Regional Strategist


ONG Seng Yeow Regional Products & Planning


ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Economist

Philippines | Indonesia (63) 2 849 8836 [email protected]

MALAYSIA WONG Chew Hann, CA Head of Research

(603) 2297 8686 [email protected] Strategy Construction & Infrastructure

Desmond CH’NG, ACA (603) 2297 8680 [email protected] Banking - Regional

LIAW Thong Jung (603) 2297 8688 [email protected] Oil & Gas

Automotive Shipping ONG Chee Ting, CA

(603) 2297 8678 [email protected] Plantations Mohshin AZIZ

(603) 2297 8692 [email protected] Aviation

Petrochem Power YIN Shao Yang, CPA

(603) 2297 8916 [email protected] Gaming – Regional

Media

Power TAN CHI WEI, CFA (603) 2297 8690 [email protected]

Construction & Infrastructure Power WONG Wei Sum, CFA

(603) 2297 8679 [email protected] Property & REITs LEE Yen Ling

(603) 2297 8691 [email protected] Building Materials

Manufacturing Technology

LEE Cheng Hooi Head of Retail

[email protected]

Technicals

HONG KONG / CHINA Edward FUNG Head of Research


Construction Ivan CHEUNG (852) 2268 0634 [email protected]

Property Industrial Ivan LI

(852) 2268 0641 [email protected] Banking & Finance Jacqueline KO

(852) 2268 0633 [email protected] Consumer Staples Andy POON

(852) 2268 0645 [email protected] Telecom & equipment Alex YEUNG

(852) 2268 0636 [email protected] Industrial

INDIA Jigar SHAH Head of Research

(91) 22 6623 2601 [email protected] Oil & Gas Automobile

Cement Anubhav GUPTA

(91) 22 6623 2605 [email protected] Metal & Mining Capital goods

Property Ganesh RAM (91) 226623 2607 [email protected]

Telecom Contractor

SINGAPORE Stephanie WONG Head of Research

(65) 6432 1451 [email protected] Strategy Small & Mid Caps

Gregory YAP (65) 6432 1450 [email protected] Technology & Manufacturing Telcos - Regional

Wilson LIEW (65) 6432 1454 [email protected]

Hotel & Resort Property & Construction James KOH

(65) 6432 1431 [email protected] Logistics Resources

Consumer Small & Mid Caps

YEAK Chee Keong, CFA (65) 6433 5730 [email protected] Healthcare

Offshore & Marine Alison FOK (65) 6433 5745 [email protected]

Services S-chips Bernard CHIN

(65) 6433 5726 [email protected] Transport (Land, Shipping & Aviation) ONG Kian Lin

(65) 6432 1470 [email protected] REITs / Property Wei Bin

(65) 6432 1455 [email protected] S-chips

Small & Mid Caps

INDONESIA Katarina SETIAWAN Head of Research

(62) 21 2557 1125 [email protected]

Consumer Strategy Telcos

Lucky ARIESANDI, CFA (62) 21 2557 1127 [email protected] Base metals

Coal Oil & Gas Rahmi MARINA

(62) 21 2557 1128 [email protected] Banking Multifinance

Pandu ANUGRAH (62) 21 2557 1137 [email protected] Auto

Heavy equipment Plantation Toll road

Adi N. WICAKSONO (62) 21 2557 1130 [email protected]

Generalist Anthony YUNUS (62) 21 2557 1134 [email protected]

Cement Infrastructure Property

Arwani PRANADJAYA (62) 21 2557 1129 [email protected] Technicals

PHILIPPINES Luz LORENZO Head of Research

(63) 2 849 8836 [email protected] Strategy

Laura DY-LIACCO (63) 2 849 8840 [email protected] Utilities

Conglomerates Telcos Lovell SARREAL

(63) 2 849 8841 [email protected] Consumer

Media Cement Kenneth NERECINA

(63) 2 849 8839 [email protected] Conglomerates Property

Ports/ Logistics Katherine TAN (63) 2 849 8843 [email protected]

Banks Construction Ramon ADVIENTO

(63) 2 849 8842 [email protected] Mining

THAILAND Mayuree CHOWVIKRAN Head of Research

(66) 2658 6300 ext 1440 [email protected] Strategy

Maria BRENDA SANCHEZ LAPIZ Co-Head of Research

Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] Consumer/ Big Caps

Andrew STOTZ Strategist

(66) 2658 6300 ext 5091 [email protected]

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected]

Media Commerce Sutthichai KUMWORACHAI

(66) 2658 6300 ext 1400 [email protected] Energy Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] Property

Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] Banking & Finance

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] Transportation

Small cap. Chatchai JINDARAT

(66) 2658 6300 ext 1401 [email protected] Electronics Pongrat RATANATAVANANANDA

(66) 2658 6300 ext 1398 [email protected] Services/ Small Caps

VIETNAM Michael KOKALARI,CFA Head of Research

(84) 838 38 66 47 [email protected]

Strategy Nguyen Thi Ngan Tuyen (84) 844 55 58 88 x 8081 [email protected]

Food and Beverage § Oil and Gas Ngo Bich Van

(84) 844 55 58 88 x 8084 [email protected] Banking Trinh Thi Ngoc Diep

(84) 844 55 58 88 x 8242 [email protected] Technololy Utilities

Construction Dang Thi Kim Thoa (84) 844 55 58 88 x 8083 [email protected]

Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 [email protected]

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