FY18 outlook remains positive. Both Mahkota Medical Centre and Regency Specialist Hospital continue to ramp up capacity on increasing demand. Both hospitals will add 34 operational beds each (or +15.7%), leading to a total bed capacity of 500 by FY18.
Meanwhile, the new hospital extension block at Regency will transform it from a 218-bed tertiary hospital to a 380-bed hospital, and eventually to a 500-bed hospital.
The new extension block will also provide the additional capacity for more clinical services, operating theatres, as well as clinic suites for sale or rental to doctors. Construction is expected to commence in FY18 after obtaining necessary approvals and is slated to commission in FY21. The construction cost is estimated at RM160mn and will be funded by debt and internal cash resources.
The Groups targets to reach 840 aggregate bed capacity – Mahkota (shifting its back office to another location will free up space for another 40 bed; eventual capacity of 340 beds) and Regency (eventual capacity of 500 beds).
Maintained Buy with unchanged DCF-derived TP of S$0.83
We maintained our view that HMI will benefit from the socioeconomic tailwinds arising from (i) government initiatives to improve infrastructure and regional connectivity; (ii) increasing domestic insurance take-up rate; (iii) ageing population; and (iv) most cost competitive pricing compared to regional peers.
The consolidation of ownership in 48.9%-owned MMC and 60.8%-owned RSH to 100% each was completed in Mar-17. We expect higher dividend payout with a full hospitals ownership structure, i.e. 100% of MMC’s and RSH’s earnings being attributable to shareholders.