The RM101.7 million paid for Amanjaya Specialist Centre Sdn Bhd (ASCS) in Sungai Petani, Kedah by IHH Healthcare Bhd is fair, according to MIDF Research.

The firm believes that the acquisition was necessary to sustain IHH’s revenue growth.

MIDF Research said based on the price, the cost per bed was estimated at RM1 million.

Traditionally, it said the cost of acquisition per bed can vary between RM700,000 and RM1 million depending on the number of beds, types of specialisation and location.

“We believe that the hospital’s fair value deserves to be at a higher range bound as it was opened in 2014 and hence, quite new. It has good reputation as one of the best private hospitals in Sungai Petani in terms of location, facilities and level of service. The hospital is green building index-certified which means it requires lower energy utilisation.”

“This translates to a reduction in operating cost by 15 to 20 per cent,” it said in a note today.

IHH announced on Monday that it had fully acquired ASCS, which owns and operates a 98-bed capacity multidiscipline specialist hospital.

MIDF Research is positive on the news as the acquisition would complement IHH’s existing hospital, including the 110-bed Pantai Hospital Sungai Petani, which is currently operating at near maximum capacity.

It also ienables the group to cater to patient volume growth in Malaysia and hence, sustained revenue growth at high single digit.

MIDF Research said given that new hospital normally has three to five years gestation period, the acquisition was not expected to contribute significantly to IHH’s earnings in financial years 2018 and 2019, having been in operation for only four years.

The firm maintained its “buy” call on IHH with an unchanged target price of RM6.95.

News Source: New Straits Times, 2 October 2018