IHH Healthcare’s Mount Elizabeth renovation ahead of schedule, the bulk to be done by Q3 2025

PRIVATE healthcare provider IHH Healthcare expects its ongoing renovation of Mount Elizabeth Hospital along Orchard Road to be largely completed by the second to third quarter of 2025, one to two quarters ahead of schedule.

However, the facility’s refurbishment will result in “some margin pressure” on IHH Healthcare’s Singapore operations until the middle of 2025, given that Mount Elizabeth has nearly halved the number of operating beds since the start of 2024 for the retrofitting works, said group chief executive Prem Nair.

“We expect by Q1 or Q2 next year to add 25 per cent of the beds back, and the remainder of the beds later in 2025,” he said in a briefing held on Thursday (Nov 28) with the announcement of its results.

As at September this year, Mount Elizabeth had around 100 to 120 beds in operation, down from around 230 to 240, noted group chief financial officer Dilip Kadambi.

“We want to accelerate (the refurbishment) and, from a patient standpoint, get the hospital up and running very quickly, rather than have a prolonged renovation exercise in Mount Elizabeth Orchard,” he said.

“There will be some pressure in Q4 (2024), and in Q1 and Q2 of next year. However, as soon as we open the facility, we’ll have a pretty good ramp up … and the margin will probably go back, by end 2025, to (around) 29 per cent,” he added.

Mount Elizabeth’s renovation plans were announced in January 2023. IHH Healthcare had said then that the refurbishment would cost S$350 million, and be done in phases to prevent disruption to major clinical services.

Earnings

The group on Thursday announced net profit of RM534 million (S$161.2 million) for the three months ended Sep 30, not much changed from the RM532 million in the corresponding year-ago period.

Revenue for the third quarter fell 3 per cent to RM5.6 billion from RM5.8 billion year on year.

In response to an analyst’s comment that the third quarter is historically the strongest one of the year, Kadambi noted that a recent appreciation of the ringgit had some effect on the currency conversion from foreign markets.

However, the group said that the third quarter had “higher patient volumes” and “revenue intensity from taking on more complex cases”. Without the effects of the Malaysian Financial Reporting Standards, revenue and earnings before interest, taxes, depreciation and amortisation (Ebitda) would have grown by 10 per cent and 7 per cent, respectively.

Brownfield expansion

IHH Healthcare’s senior management is bullish on India, noting that the market offers favourable trends for private healthcare, such as increasing income, higher insurance penetration and younger demographics.

Its India facilities, which include Gleneagles India and Fortis Healthcare, are running at about 77 per cent occupancy – a figure Kadambi described as “reasonably full” and bodes well for the group’s intended brownfield expansion.

IHH Healthcare previously announced that over the next five years, it would expand bed capacity by 38 per cent, or 1,560 beds, and invest in medical equipment for its Fortis Healthcare brand. Gleneagles India will raise its number of beds by 34 per cent, or 300 beds, over the same period.

The group also recently opened the 350-bed Fortis Hospital, Manesar, in the National Capital Region of India, a region encompassing Delhi and its surrounding districts.

Said Dr Nair: “Essentially, we’d like to keep average occupancy in the high 60s to early 70s. Anytime it goes above that, we’d look for the ability to expand – brownfield, ideally, or adjacent land, or new tactical acquisitions to fill that cluster.”

The group has also strengthened its foothold in Malaysia, with the completion of the Island Hospital acquisition on Nov 4. It is the third hospital in IHH Healthcare’s Penang cluster, which was running at full capacity before the deal.

The group had previously issued RM4 billion in unrated sukuk – or Sharia-compliant bonds – to finance the deal, which includes the purchase of the hospital and a vacant plot of land that can be used for future development.

The group is now focused on utilising the 600 beds in Island Hospital, before considering whether further capacity is needed in the future – “10, 20, 30 years down the road”, said Dr Nair.

Shares of IHH Healthcare closed S$0.02 or 0.9 per cent higher at S$2.19 on Friday.