Brokers' take

Compiled by Cai Haoxiang

IHH HEALTHCARE | HOLD

NOV 28 CLOSE: $1.85

TARGET PRICE: $1.71

UOB Kay Hian, Nov 28

IHH's 9M 2017 adjusted core earnings fell 36 per cent year on year, below our and consensus estimates.

Start-up losses associated with expansion plans continued to be the main earnings drag.

On a positive note, existing core markets continued to perform well operationally, registering growth in inpatient volume and revenue intensity.

However, we expect cost pressures to remain high on the back of upcoming expansion plans across China over the next one to two years.

Maintain "hold" with a lower sum of the parts target price of $1.71 (previously $1.73).

The lower target price is a mix of downward adjustments of earnings offset by higher EV/Ebitda (enterprise value to earnings before interest, taxes, depreciation and amortisation) multiple for hospitals at 19.5 times versus 19 times previously, and higher market value of Parkway Life Reit.

Entry price: $1.50.

SINGAPORE STRATEGY

DBS Group Research, Nov 27

AS the global and regional recovery continues in 2018, we expect Singapore to be a prominent beneficiary of liquidity inflow seeking fair earnings growth at a reasonably attractive price to earnings (PE) valuation.

The upturn in Singapore's residential property market looks poised to continue in 2018, powered by strong en bloc activities, pent-up demand still unfolding, unsold inventories at 16-year low, and the possible return of foreigners' purchases.

We see physical property prices rising 6 to 10 per cent over the next two years. The residential property market's upturn should also lift consumer sentiment and spur spending that, in turn, will underpin the services sector.

Four risks can derail the positive view.

First, an acceleration in inflationary pressure can push interest rates up faster than expected.

Second, there are high global debt levels. The percentage of "stressed" firms that cannot cover interest expense has reached some 15-25 per cent of corporate assets in countries such as Brazil, India, Turkey, and China.

Third, a high developed market PE valuation leaves little room for earnings disappointment. Any correction or volatility in the G3 (US, Japan, Europe) equity markets, especially the US, will also resonate to Asian equities, including Singapore.

Finally, the eurozone, Middle East and North Korea are three potential risk regions.

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