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Nikkei Markets

IHH Healthcare's fourth quarter profit jumps five-fold

To adopt multi-country strategy to diversify earnings, spend more on growth

IHH Healthcare operates over 15,000 beds in 82 hospitals across 11 countries. (Photo by Kentaro Iwamoto) 

KUALA LUMPUR (Nikkei Markets) - IHH Healthcare, Asia's biggest hospital operator by market value, Wednesday reported a five-fold jump in fourth quarter net profit from a year earlier driven mostly by growth in current operations, while foreign exchange gains also helped.

Net profit for the three months ended Dec. 31 totalled 509.42 million ringgit ($125.22 million) compared with 101.26 million ringgit over the same period last year, IHH said in an exchange filing. Quarterly revenue climbed 9.7% year-on-year to 3.17 billion ringgit from 2.89 billion ringgit.

The company will adopt a "multi-country portfolio strategy to diversify its earnings base in cash flow-generative markets such as Singapore and Malaysia, medium-term growth momentum from Turkey and long-term growth opportunities from India and Greater China," IHH said.

IHH Healthcare - which operates over 15,000 beds in 82 hospitals across 11 countries - has been ramping up expansion into developing economies such as India and China, where large population and rapidly rising income are driving demand for quality healthcare and advanced treatment. Consulting firm Deloitte forecasts the global healthcare market may expand to $10.1 trillion by 2022 from $7.7 trillion in 2017, driven by faster spending in Asia among others.

Apart from Malaysia, the company considers Singapore, Turkey, and India as its home markets and aims to expand further in China and Hong Kong. In November, IHH took control of Fortis Healthcare and completed acquisition of all the Indian assets of RHT Health Trust in January.

IHH plans to spend about two billion ringgit from the first quarter onwards to expand existing hospitals and construct new facilities, Chief Executive Tan See Leng said at an earnings briefing. Capital spending will be funded mostly through operating cash flows and bank loans if needed, he said.

The company has two green-field hospitals in China and expansion efforts at one of its hospitals in Malaysia are due to end by 2020. In the immediate term, IHH will focus on integrating previously-acquired assets such as Fortis' hospitals during the markets' "consolidation phase," Tan said.

"We have since assumed board control and completed the RHT acquisition as planned," he said. "Now, together with the Fortis management team, we are focused on implementing key initiatives we have jointly identified to restore its performance over the medium to long term."

For the full year, IHH Healthcare's net profit fell more than one-third to 627.69 million ringgit from 9769.95 million ringgit in 2017. Revenue however rose 3.4% to 11.52 billion ringgit from 11.14 billion ringgit.

IHH blamed higher net currency losses for non-Turkish lira loans for the decline, and the company also booked one-off gains from stake disposal in 2017. "We are working towards repaying $250 million-equivalent of existing non-Turkish lira debt to manage forex exposure," Tan said.

Shares of the dual-listed IHH fell 0.7% in Malaysia and 1.1% in Singapore ahead of the earnings announcement. The benchmark FTSE Bursa Malaysia KLCI ended 0.3% lower, while Singapore's Straits Times Index closed 0.4% down.

--Jason Ng

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