DIGITAL healthcare may be a new norm in the medical field but its adoption has certainly been accelerated multi-folds by the advent of the COVID-19 pandemic.
So can digital healthcare be a money-spinner that is capable of propelling IHH Healthcare Bhd’s future earnings to greater heights?
Having launched its telemedicine services in May 2020, IHH aims to develop its digital healthcare capabilities over the next three years by allocating US$100 mil (RM418 mil) for this purpose.
In March of the same year, IHH invested in a minority stake in Singapore-based telehealth start-up Doctor Anywhere (DA) which offers on-demand healthcare solutions through a digital platform.
DA aims to provide quick access to health and wellness solutions from anywhere. In early September 2021, IHH Healthcare made a follow-on investment as part of DA’s Series C fundraising.
AmResearch analyst Alan Lim Seong Chun is positive on IHH’s venture into digital healthcare as this should lead to better operating efficiency and improved patient experience.
“For example, hypertension patients can reduce their frequency of visits to hospitals by submitting their blood pressure data (taken at home) periodically to the hospitals. Operationally, doctors will be able to focus their time on more serious cases,” he opined in a company update.
“Artificial intelligence and machine learning can also be applied in certain areas such as detecting abnormalities in patients’ scans and X-ray readings.”
But insofar as private hospitals are concerned, digital healthcare alone cannot guarantee stable income as AmResearch pointed out in its 3Q FY2021 earnings preview of IHH.
“We believe that IHH’s earnings for 3Q FY2021 should decline quarter-on-quarter (qoq) but better year-on-year (yoy) considering COVID-19 daily new cases in India have eased to about 20,000 cases in September from the peak of 400,000 cases in May,” justified the research house.
“This should result in lower revenue for IHH Laboratory in 3Q FY2021 due to lower COVID-19 tests.”
Recall that IHH Laboratory generated RM975 mil in its 1H FY2021. India has the highest number of labs at over 420 (87% of the total 483 labs in four key markets).
“Although the number of elective surgeries may increase in 3Q FY2021, we expect that these would not be enough to offset the impact the lower earnings from laboratory tests,” noted AmResearch.
All-in-all, the research house retained its “hold” rating on IHH with a discounted cash flow (DCF)-based fair value of RM6.29.
“We are positive on the group’s digital healthcare initiative. Separately, we believe that 3Q FY2021 earnings should decline qoq due to lower earnings contribution from its laboratory segment.”
At 10.15am, IHH was up 7 sen or 1.06% to RM6.67 with 1.13 million shares traded, thus valuing the company at RM58.58 bil. – Oct 5, 2021
