IHH: Accounting Income vs Real Income

IHH has much potential. However, it has tried too hard to show numbers. The fact of the matter is that for a private hospital with strong brands, its results will come.

Reading yesterday's announcement, I can already envision what the headlines would be. The Star reported with headline, "Sterling performance for IHH Healthcare post-listing".
 
IHH reports - Total growth is driven by combination of factors:

• Consolidation of Acibadem Holdings from 24 Jan 2012
• One-time profit from sale (add RM193.6 million) of Mount Elizabeth Novena medical suites as well as fair valuation gain (add RM132.6 million) on Mount Elizabeth Novena’s investment properties held for rental
• Improved performance of existing operations
• Greater demand for quality healthcare services in Asia

Now, remember that this is one business which foresees full year PAT of between RM700 million to RM800 million during listing. Based on the report below, it seems it is on track, but of course with one-off items.

To be fair, they did have pre-operating expenses for Mount Elizabeth Novena which was charged to the accounts. Inclusive of those one-off items, its results look like this.

Now, all in all without the exceptional items, here are the actual results which we will see moderate to good growth over time - not exceptional.

You will note that with those income minus the one-off items, its performance should more resemble PAT of between RM500 - RM550 million. And it is trading at RM25.5 billion market capitalization. Shouldn't that be still expensive?