KUALA LUMPUR, Oct 1 — Kenanga Research has downgraded its call on IHH Healthcare Bhd to “market perform” from “outperform” with a target price of RM6.65 as its share price has risen 31 per cent following the stock’s upgrade after the company’s fourth quarter fiscal year 2020 (Q4FY20) results.
The research house said the run-up in share price was due to expectations of IHH Healthcare’s strong earnings recovery in the financial year of 2022 (FY22), underpinned by both its India operation and Turkey hospital Acibadem showing signs of faster-than-expected recovery, registering their third consecutive quarterly profits in Q2FY21.
“Elsewhere, pent-up demand and ramp-up of the CEE (Central Eastern Europe) region business coupled with de-leveraging of non-LIRA debt exposure have also alleviated the finance cost of Acibadem,” it said.
Meanwhile, the research house said Pharmaniaga’s current valuations are unattractive, which seem to have over-priced the drugmaker’s positive near-term prospects.
“The stock lacks earnings growth visibility due to uncertainty of sustainability of vaccine-driven earnings growth and despite factoring in concession extension beyond December 2021 to supply medicine and medical supplies for procurement of drugs, the stock is trading at rich valuation at 18 times and 21 times FY21E and FY22E earnings, respectively,” it said.
For KPJ, it said the stock lacks a re-rating catalyst and that “new hospitals under gestation period could continue to be a drag to earnings,” hence, the research house has reiterated its market perform call with a target price of RM1.03.
“KPJ’s lack of re-rating catalyst and new hospitals under gestation period could continue to be a drag to earnings. The group will continue to take advantage of governments’ incentives to mitigate the adverse effects of the pandemic.
“However, its new hospitals such as KPJ Bandar Dato’ Onn, KPJ Batu Pahat, KPJ Perlis, and KPJ Miri under gestation period could continue to drag overall earnings,” it added. — Bernama
