Meanwhile, strong Singapore and Malaysia hospital operations provide a sustainable earnings base for the group, underpinned by favourable macro trends.
"We expect an EBITDA breakeven in FY19," says analyst Ngoh Yi Sin, adding any share price weakness would be an attractive entry point to accumulate the stock.
Indeed, 2017 had largely been a disappointing year for IHH, in terms of both share price and bottom line, as the opening of Gleneagles HK and Acibadem Altunizade in March weighed on overall profitability. A weaker Turkish lira against the ringgit did not help either.
Still, Singapore operations remain resilient. As of 9M17, the four local hospitals saw an overall 2.1% increase in inpatient admissions and 7.9% increase in revenue per inpatient admission.
Malaysia hospitals recorded 2.2% higher inpatient admissions, and 11.1% y-o-y growth in revenue per inpatient admission.
This year, the Malaysian government has allocated RM30 million ($10 million) in its Budget to the promotion of medical tourism.
Looking ahead, expansion in China and India could power the group's next growth phase.
IHH remains on track to penetrate into China, starting with 350 beds in Chengdu, 70 beds in Nanjing and 450 in Shanghai from late-2018 to 2020.
"We believe these are long-term growth potentials for the group, as it taps into the growing private healthcare demand of China’s large population," says Ngoh.
However, the analyst says pre-opening and start-up costs for these new hospitals are unlikely to be as extensive as those of Gleneagles HK, due to the phased opening of hospital beds, smaller ownership stakes and more asset-light approach.
Finally, India is still a small contributor of IHH’s overall earnings. But the recent issuance of US$500 million ($665.5 million) senior perps could be a war chest to pursue more aggressive inorganic growth in India, especially with more attractive valuations of potential targets.
Share in IHH are down 3 cents at $1.93 or 48.3 times FY18 core earnings.
