Here’s what’s holding IHH Healthcare back in its aggressive overseas expansion

Skyrocketing staff costs aren’t letting up.

The international healthcare firm is embarking on its next stage of growth as its three China hospitals are targeted to come on-stream in the next four years, but higher staff costs are proving to be a challenge for the firm.

According to a report by UOB Kay Hian, cost pressure is likely to remain high, due to wage inflation and higher minimum wage regulation in some countries.

“Implementation of the 6% GST in Malaysia will also be an added pressure on cost of inventories and consumables. Additionally, start-up costs are also expected to trend higher in 2H16 leading up to the opening of Gleneagles HK,” UOB Kay Hian noted.

However, the report said IHH Healthcare intends to offset the impact of higher cost pressures through higher revenue intensity procedures, cost optimisation and tighter cost control.

Meanwhile, the report added that its expansion in Greater China is likely to drive its next phase of growth.

“With Gleneagles HK and Chengdu Hospital coming on-stream by 2017 and Shanghai Hospital by 2020, we believe IHH’s China ventures comes at a very strategic time when the healthcare industry in China is taking off. China’s healthcare industry is well-supported by positive socio-demographic trends, such as rising affluence, growing urbanisation and an ageing population,” the report said.