The healthcare sector is buzzing with anticipation as Maybank Securities forecasts a potential re-rating of IHH Healthcare’s stock, spurred by the possible initial public offerings (IPOs) of Malaysia-based Sunway Healthcare and Columbia Asia Healthcare. Analysts at Maybank have reinstated coverage on IHH with a “buy” recommendation and a revised target price of RM7.97 for its Bursa-listed shares, up from RM7.13.

Strong Growth Drivers for IHH Healthcare

IHH Healthcare, traded on both Bursa Malaysia and the Singapore Exchange, has seen its shares surge over 20% this year. Maybank analysts Yin Shao Yang and Nur Natasha Ariza anticipate further upside, citing robust growth drivers, particularly in India and Malaysia.

“IHH is well-positioned to leverage rising demand and increased revenue intensity,” the analysts noted in their Dec. 27 report, forecasting a compound annual growth rate (CAGR) of 13% for revenue and EBITDA over the next three years.

The healthcare sector’s resilience, tied closely to GDP growth, underpins IHH’s attractiveness as a “defensive” stock.

Potential IPOs: A Game Changer for Valuations

The spotlight is on the anticipated IPOs of Sunway Healthcare and Columbia Asia Healthcare, expected in the next two years. If these players secure valuations higher than IHH’s current 13x FY2024 EV/EBITDA, it could catalyze a re-rating for IHH, enhancing its market value.

“A higher valuation for these peers could drive investor sentiment, making IHH’s shares more attractive,” the Maybank report stated.

Challenges and Risks

Despite the optimism, analysts caution against potential risks, including rising staff costs, regulatory interventions, and possible delays or lower valuations of the anticipated IPOs. These factors could temper the bullish outlook.

Additionally, government regulations affecting private hospital charges and other unforeseen policy shifts could impact IHH’s growth trajectory.

Privatisation as a Wild Card

Another potential catalyst lies in the possible privatisation of IHH by its largest shareholder, Mitsui & Co. Past discussions around such a move—in May 2021 and again in September 2024—led to significant share price increases of 20% and 5%, respectively.

“If Mitsui were to make another privatisation attempt, it’s reasonable to expect a similar positive reaction in IHH’s share price,” Maybank analysts suggested.

Current Market Performance

As of the latest trading session, IHH’s shares on the Singapore Exchange are priced at S$2.19, marking a year-to-date increase of 26.59%. On Bursa Malaysia, its shares traded at RM7.24, up 20.87% year-to-date.

With strong growth drivers, potential market catalysts, and the defensive appeal of the healthcare sector, IHH Healthcare is poised to remain a key player to watch in the coming years.

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