Can IHH Healthcare withstand rising cost pressure?

Staff costs have skyrocketed to unprecedented levels.

Cost pressure crushing the healthcare firm has showed no signs of slowing down, aggravated by wage inflation, higher minimum wages, and higher inventories, among others.

According to analysts from UOB Kay Hian, other contributors to the ballooning pressure include higher consumable costs from the implementation of GST in Malaysia and increased complex procedures undertaken.

However, UOB Kay Hian said IHH is expected to offset the impact of these cost pressures through higher intensity procedures, cost optimisation and tighter cost controls.

Additionally, the report said three new hospitals are targeted to come on stream in 2017, which are Gleneagles Hong Kong, Parkway Hospital Chengdu and Acibadem Altunizade in Istanbul.

The healthcare firm is also expanding its footprint to Bulgaria, as Acibadem signed a definitive agreement to acquire Bulgaria-based Tokuda Group for RM286.1m while simultaneously acquiring approximately one-third stake in City Clinic from its existing operating partners for RM48.3m, the report said.

“Pending conditions precedent, the deal is expected to close within three months, following which Acibadem will be the leading private healthcare operator in Bulgaria with four hospitals totaling approximately 750 beds and 4 medical centres,” UOB Kay Hian added.