IHH’s wholly-owned subsidiary Pantai Holdings Sdn Bhd has signed a share purchase agreement (SPA) with Saravita Holdings Sdn Bhd and nine individual founders for the acquisition.
BHSB, via its wholly-owned subsidiaries, owns the Timberland Medical Centre (TMC) in Kuching, Sarawak, which has 82-beds and has been in operation since 1994.
The acquisition is expected to be completed by the first half of 2024, subject to regulatory approvals.
Bedrock Healthcare’s plan for further expansion is also a significant aspect of this acquisition. The company has earmarked a vacant land in central Kuching for the construction of a new 200-bed tertiary hospital.
This expansion initiative aligns with IHH’s strategy to bolster its presence in key regions including Malaysia, India, and Turkey, said analysts.
Kenanga Research said the TMC acquisition allows IHH Healthcare to tap into the Sarawak market and cater to the middle to higher-income patient demographic.
“The valuation of the acquisition is also viewed as reasonable, considering Timberland Medical Centre’s solid financial performance,” it said.
The research house has a “buy” recommendation on IHH, with an opening price of RM6 and a target price of RM7, indicating a potential upside of RM1.00 or 16.67%.
MIDF Research believes the acquisition would be to IHH’s advantage, considering Sarawak had been developing its industrial, and oil and gas sectors, which translated to potentially more demand for hospital care.
“Medical tourism is also expected to play a role, as domestic travels to the state had rapidly increased in CY2022 by +138% to 15.5 million domestic visitors, with an expected additional +20% rise by the end of CY2023,” MIDF said.
Sarawak’s ageing population
It also noted that the ageing population in Sarawak is increasing at a rate of 0.55% per year, since 2020.
It is expected that by 2028, Sarawak would officially be an ageing state, with the current population standing at approximately 312,000, which consists of 12.6% of Sarawak’s population.
“We like IHH for its medium to long-term growth strategies as a healthcare service provider and with the demographic gradually returning to pre-pandemic demand for healthcare, in addition to the increase in senior citizen population requiring more healthcare services, we maintain positive on IHH’s prospects and operational excellence,” it added.
The research house has maintained its “buy” call on IHH with a target price of RM6.57.
Meanwhile, Public Investment Bank’s analysts point out that while the earnings impact of the acquisition might be relatively modest in the context of IHH’s total operational capacity, the move showcases its commitment to expanding its reach and influence in the healthcare sector.
It has issued a “buy” recommendation on IHH with an opening price of RM5.98 and a target price of RM7.63, indicating a potential upside of RM1.65 (27.59%).
IHH closed the day two sen or 0.33% lower at RM5.98, valuing the group at RM52.7 billion.