IHH Healthcare Berhad (IHH) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the [Technical Difficulty] Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, 1st of March 2023. I would now like to hand the call over to your first speaker today, Ms. Penelope Koh from Investor Relations at IHH. Please go ahead, Ms. Koh.

Thank you. Good morning, and thank you for joining us this morning. I'm Penelope from IHH Investor Relations. Welcome to joining us for our Q4 and full year 2022 results briefing, whereby we're doing it via a live video broadcast available on our webcast. With me today are Mr. Joe Sim, our Group Chief Operating Officer; and Mr. Joerg Ayrle, our Group Chief Financial Officer. I also have the pleasure to invite Evren, our Deputy CEO of Strategy and Business Development of Acibadem. Our materials are also available for download on the IHH website. As for the sequence of event, we will have Joe make some opening remarks before passing on to Joerg to speak about the key financial performance. And before -- then it goes back to Joe to speak on the operational highlights as well as the outlook before we move on to the Q&A. So with that, I'll turn the call to Joe. Joe, please.

Thank you, Penny. Good morning, everyone. My name is Joe, and thank you for joining us. It's a pleasure to speak to you, I believe, for the first time for most of us. And as you're aware, I'm covering Kelvin's duty after he has stepped down last week. And on behalf of management, I would like to thank Kelvin for his leadership for the last 3 years, particularly, he has actually instituted a very strong belief that we should always put patients in the center. And that is actually very fundamental to what we do. And I believe that, that has a very strong foundation for us to move forward. And at the same time, he has also steered the group through a very difficult COVID period and we have done very well under his leadership in terms of performance. And last but not least, on the ESG front, Kelvin has also been very instrumental in helping us lay down the strategic directions as well as the goals for ESG. So on behalf of the management, I would like to thank him for his contributions. I would like to also, at this stage, share and also share our view that our Board and management remains working very closely together to -- during this transition period. The search process is ongoing. I'm sure this is on top of many of your minds. Rest be assured that the proper process is actually being followed, and we will let the process take its due course. In the meantime, I'm very confident of the team here. In IHH, we have both the strength and the depth at the group level as well as at a country level to make sure that we continue to strive on the policies, the strategies and the growth that we are actually working towards over the next year. And I'm very confident that all of us are even more united to make sure that we do even better every year that we go through. So on this note, before we start the results briefing proper, maybe I'd like to also touch on something before we go to next slide. Okay. All of us at IHH are deeply deepened by the earthquake that happened in parts of Turkey and also in Syria. And at this point, I thought it may be useful for us to share some of the relief effort that we are doing. And I think the key thing to note is that our operations in Turkey is very stable and remains stable despite the earthquake. And over and beyond the business as usual, our team in Turkey have done tremendous work in the disaster relief. And that's something which we are very proud of, which I'll like Evren to add a bit more color to that. Evren?

Thank you. [Technical Difficulty] and starting from day 1 of the operations, we, as a group, were very active in the earthquake zone. We had many different ways of supporting the earthquake victims by means of delivering our ambulances from day 1 as well as providing food supplies, clothing, many different type of things. And being a health care player in the market, we also were very active providing health care services. We administered one of the public hospitals complete health care service delivery in the region. Maybe just to put it in perspective, we supported all the treatment efforts. Now we are -- we have mobilized more than 50 of our doctors as well as 200 nurses, which is actively working in the region, providing health care services to the people. Like I said, as well as we have other initiatives. I think Joe talked about being united, what maybe I would like to also say that IHH Healthcare as our parent organization supported our health efforts by donating $1 million, which will be used to build up a container house village for the earthquake victims affected by the region. So I think this is a quite good sign of being united in this hard time.

Thank you, Evren. So if I switch the focus back to the results release, there will be actually 4 parts to it. The first 2 parts, on the results overview and the financial highlights will be covered by Joerg. And after he has covered that, I will come on to talk about the operational highlights as well as the outlook going forward. So over to you, Joerg.

Yes. Thanks, Joe. Good morning, everybody, to this Q4 earnings release. Before we get into the numbers, just a quick overview on our operations at a glance, we have reached 70% bed occupancy rates. Again, that's really great across the parameter, of course, different by countries. And you will see a lot of that in the later sections, but really great performance by the whole organization, 223,000 inpatient admits. This is one of our key indicators for growth. Operational beds, we have nearly 12,000 and we've talked a lot about organic growth, adding another 1,200 in India, another 600 in Malaysia, and we're looking throughout the parameter to open beds and grow organically. That's the most capital efficient growth that we have and we have full steam ahead to really fulfill this. On our lab business, 23.4 million lab tests. We are really one of the leaders in the laboratory space in the markets that we operate in, and we'll talk a little bit about that later. We have now 82 hospitals. I don't know if it includes already our Shanghai Hospital that we just opened a couple of weeks ago. We operate in 10 countries, and we have 7 trusted brands. If we jump right into the numbers, look, super robust performance, I internally called it a rockstar quarter, Q4, fantastic growth in some of our key markets. Malaysia is doing super well. Our Turkish and European parameters do very, very well and have really contributed to a Q4 where we now say 11% underlying growth and we've put a little green box around those numbers that we find are the real core underlying performance, pre-MFRS 129 financials. It's 11% growth to MYR 5 billion revenue. We have achieved MYR 1.1 billion in EBITDA. That's up 1% from a very strong quarter for in 2021. Net operating income pretty flat compared to a year ago, MYR 424 million. And you can really see a very strong underlying performance. Of course, if you then add in MFRS 129, you'll see the numbers in the bridge a little bit later. Of course, you have also noted, we have impaired a large part of our Chinese assets. I think prudence dictates that we do look into this. We have promised that we are derisking the operations and we are absolutely determined to be on this improvement path. We have sold and closed the Chengdu Hospital to Perennial, our joint venture partner. So that's a really first good proof point that we are executing in this. I have been together with the team in Shanghai 2 weeks ago, visited all our operations. We had a soft opening for our Shanghai Hospital. And look, this is a difficult situation coming out of COVID. China is a complex market. At the same time, there are some gold nuggets that we can lift and look at, however, our overall strategy on derisking and exiting this market is intact and we continue to deliver on that. So reported net income after the impairment is MYR 122.6 million, but I think we really need to look at the underlying performance, 11% growth in top line really great performance. And thanks to the whole organization for doing this home run at the end of December. On the next page, and that's another full year. We've reached MYR 18.1 billion. That's also an up of 6%. So this whole equation of coming out of COVID with a drop-off in lab and special services revenues and a return of patients and tourists has turned out to be absolutely correct. We have been able to compensate. And if you look at operating income, overcompensate some softening in the COVID-related revenues with a very strong health care and hospital growth, especially in our core markets. So for the year, MYR 18.1 billion. And look, a lot of people have doubted that we could exceed MYR 4 billion in EBITDA. We had MYR 4.2 billion. And I think that's now [ USD 0.5 billion, clearly USD 0.5 billion ]. I think that's a really strong signal for further growth. And I don't think you should be surprised if we exceed the MYR 20 billion revenue mark very soon over the next quarters. If you go to the next page, our long-term tracking, I don't want to comment too much on it. I think it's the same story. We've normalized out of COVID. We'll stop the COVID-related tracking going forward. If you look at the dotted line, you see how stable our underlying operating performance is and yes, of course, the green line includes some uplifts on revaluation, non-cash revaluations on MFRS 129, includes some impairments. That's why we are showing here the dotted line, a very strong and solid continuous growth and improvement. On Page 10, a firm recovery. We discussed it, but let me highlight 2 markets. And that is Malaysia, very strong reported patient volumes growth, bed occupancy, 68%, very strong top line growth, excellent EBITDA margin. So really. Malaysia is one of the earnings pillars for our business, so, is Turkey with a rebound of -- and we've reported on that in Q1, Q2, we had a little bit of a softening in EBITDA margins due to desynchronization of hyperinflation effects. And in Q4, this has bounced back to 27% EBITDA margins as compared to 21% a quarter earlier. And it's not on this page, but I want to really do a call out to our Hong Kong colleagues. We had in the month of December, the first time double-digit EBITDA results and I think that calls for a great shout out. Higher operating cost, inflation is real. I think we don't need to go through that in too much detail, and I think we need to be conscious on how we address this in a mixture of cost management and, of course, price adjustments. Our return on equity is now underlying without the impairment between 7% and 7.5%. That's what we've guided to. Our double ROE strategy is intact and we will continue to drive that. On the next page, a quick bridge on the net income. It does look on a reported basis, of course, a little bit grim. But if you strip out the special effects, especially on the impairment, you see that we are ending up here at MYR 429 million, pre-impairment and the MFRS 129 extraordinary items. And that is basically flat to prior periods and I think that's a great signal. But then we, of course, recorded the impairment to derisk our China assets. Let's jump over the next page and go to Page 15. And here, you see the strong growth in Malaysia, strong EBITDA growth, continued growth in Singapore. I think on the EBITDA front, we are still a little bit affected by the labs melt-off from COVID. The underlying hospital performance in Singapore is very strong. We see very strong patient growth and you'll see that later in the segment slides. Turkey, Europe, strong growth. India, I guess, we do need to discuss a little bit more later, but that is an area we are in discussions with management in India about -- we do need to find ways how to structurally improve our EBITDA performance. And I think we are on a good path into these discussions. Again, 2 pages. Yes, MFRS 129. We have an MYR 89 million impact on the balance sheet re-indexing, that is the continuous uplift in re-indexing our assets, our non-monetary assets, which are then recorded through the P&L. It's an extraordinary item. We have then some P&L re-indexing, that is the difference between the average exchange rate for the quarter, which is used in our regular accounting and MFRS 129 million requires us to shift this to quarter-end FX rates and that creates a little bit of a phasing issue. And then the real impact, the MYR 61 million is the real impact that will remain with us. That is the increased depreciation from the increased asset base that we have. On the next page, continued deleveraging of our business, strong earnings contribution, strong cash contribution from the business. And you see that our leverage ratios have reduced. I think if you move to the next page, you see that even better. Net debt to equity stands now at 0.25 and deleveraging and strong cash contribution continues. Of course, if you look at the ROE, it is affected by the one-time effects on impairment. ROCE, however, continues to stay strong and is increasing sequentially. Our double-digit ROE strategy is intact. We will drive capital efficiency going forward through our investment strategy, through eliminating loss makers, improving the earnings of our underlying business. And look, of course, with inflation, cost management comes into a higher focus and that will be part of our discussions going forward. Now good news for shareholders. We've increased our dividend from [ 6 sen to 7 sen ]. At least that is what we will propose to -- have proposed to our Board. It's a 46% dividend payout ratio. And if you recall, 2 years ago, our dividend was [ 4 sen]. So we've nearly doubled our dividend in 2 years. We're on a very strong streak. We have a very strong belief in the underlying cash performance of the business. And we will, of course, stay strong around strengthening and improving dividend yield for investors. And with this, I'll pass back to Joe to talk a little bit about the operations.

Yes. Thanks, Joerg. Okay. Back to operations. I think you can see from the numbers here that as a group, our inpatient admission is actually very stable across all the different markets. In fact, with the return of foreign tourists, medical tourists, we have seen an uplift in both Singapore, Malaysia, Turkey, India, almost across all the markets, which serve our medical tourists that there is actually a significant recovery back to the pre-COVID levels, which is something which we expect to continue to actually keep us busy for 2023. Next page. Moving forward, I will actually cover by segments, how does the operations performance look like. And what are the key drivers for 2023. I'll start with Malaysia first. For Malaysia, you can see that we have actually fully walked out of the lows during the COVID time. Our inpatient admission has actually -- for domestic patients have surpassed the 2019 level. And at the same time, with the opening up of the borders in Malaysia in the second half of the year, we're also seeing the return of medical tourists. So over here, I noticed something quite interesting is that while the revenue has increased and -- but you look at the bed occupancies are almost likely flat. That's mainly because we've added beds since 2019. So even though you see that it's 71% versus 68%, actually is on a larger base. At the same time, Malaysia, we also observe a very interesting phenomena because during COVID time in Malaysia, most people who have the common [indiscernible] and all that, they try to refrain from coming to hospital. And that's why the revenue intensity last year is actually marginally higher than this year, mainly because when it comes to hospital, they are usually quite severe already. So that is the actual the situation last year. But this year, with the recovery of -- from COVID, we are seeing more of the BAU cases as well. So while volume has increased and shot back to pre-COVID levels, we also see the normalization of the revenue intensity, which is something that we expect. But by and large, I would say that Malaysia is actually doing very well. And we're actually focusing on how we continue to drive the bed occupancy, increasing our organic capacity as well as M&A moving forward. And at the same time, we are also putting a lot of effort in building up our digital presence and outreach to the patient so that we can serve patients better and also increase our reach to them even better. So that's for Malaysia. Next, I'll move on to -- okay, I'll skip this slide. Next one, Singapore, okay. So for Singapore, we can see that the revenue has increased by 4% and that's actually powered very much by the return of the foreign patients. As you -- most of you are aware, in the first half of 2022, the Singapore government opened its border to the extent that we have many patients, particularly from Indonesia, dragging their suitcase straight from the airport down to a hospital to seek treatment because they were deprived of access to the health care treatment in Singapore for during the COVID time. So we are continuing to see that growth. And we are actually very optimistic that this actually will continue to be a major source of the revenue growth in Singapore. And at the same time, for Singapore, we can also see that the -- this return of our [ firm ] patients coupled with our effort to refresh and also our capacity. We're actually adding new services like Proton beam, which will see the revenues still increase further. That's actually a very advanced radio therapy for patients who are seeking to -- for cancer treatment. And at the same time, we're also moving into the ambulatory space with the ambulatory care center, surgical center, which is very much in line with what we are seeing a trend now where more of the cases are also being done in the average setting. So that is essentially the key thing for Singapore. And in Singapore, I will also say that we continue to face the challenge of nursing shortage, which we are working very hard with our college and colleagues as well as our -- this ministry to see how we can address that. And one of the key things that we have done in 2022 is that we have introduced what we call the Patient Care system to take away the non-nursing load of nurses. And that helped a lot in helping us to relieve the stress on the nurses and allow our nurses to be even more productive. Next country. Okay. So the next one is on Turkey, another of our very good performer for 2022. Turkey and European operations, we saw revenue increase by 18%, okay. That's quite significant. And at the same time, EBITDA increased 13% to MYR 358 million and the margins also improved to 27%. And that's minus despite all the challenges that we see in terms of the political situation as well as post-COVID and also the inflation. And that's something that's very credible. And for Turkey, the average occupancy was 75%, which is very high. And I would just want to say that over here, our Turkish operation has not been affected by the -- this earthquake. We are saddened by the event, but we also take heart that our Turkish colleague has risen well above the challenge and has actually done very well over here. Okay. Next one is on European operations. Okay. We continue to improve the non-Lira contribution for Acibadem. And actually, that's quite significant. If you look at the figures here, okay, for the quarter, the non-Lira contributions made up 46% of Acibadem's total revenue, of which 15% comes from foreign medical travelers and 31% comes from the European operations. And that is also an area where we are continuing to actually look for opportunities to continue our growth over in this area. Next slide. So one good thing to announce is that in 2023, February, we acquired this Kent Hospital in the Izmir region. And that actually is in line with our M&A and growth strategy that we continue to expand in markets, which we see a lot of potential. And in Turkey and in Europe, we do see those potential. Next area, India. Okay. So there was a healthy recovery of inpatient admission into our Indian operations, which includes both Fortis, as well as our global hospitals. And revenue increased by 6%. And down here, I think we're quite a bit of insight to interpret this. We see that the inpatient admission has decreased by 2%, but the revenue intensity has increased by 12%. That's mainly because our hospitals are actually seeing the return of the more complex cases that is coming back to the hospital post-COVID. And also because of this higher-end cases like oncology and all that, with the payment system over there, there is a certain lower margin associated with all these difficult transplant, cancer cases and all that. But we're happy that they are coming back and now the things are actually -- volumes are returning back to what we see before COVID. And that's something which we are quite heartened and even though the EBITDA decreased by 8%, but we are happy that the volume is actually coming back and our doctors are actually going to -- getting to do what they do best, which is tertiary care. And in fact, in the area of transplant, we are very strong on this and the volumes there are really something that is respectable when we publish the volumes and data worldwide. Next area. Hong Kong. Okay. For Hong Kong, we actually -- the revenue increased 29% to MYR 252 million and the EBITDA also set a new high. This is actually a recovery from COVID. If you recall, the restrictions were very tight in Hong Kong. And despite that, our colleagues have actually done very well in Hong Kong with the recovery. Next area. IHH Labs. Okay. IHH Labs, as Joerg has mentioned, the COVID volume has tapered off. But what is more important here is that the non-COVID volume is actually gaining strength. And that is actually something that will provide a stable base and a growing base for our lab business. Next area, outlook. So to sum up, a few things here. We expect revenue to grow and the underlying macroeconomic actually favors us because of the huge demand for health care and the supply that we see in the regions we operate. There's still a lot of room for growth for us. And at the same time, we are also investing in our facilities at Mount Elizabeth Hospital, where we are renovating it so that we can actually have a better facility and also capacity to serve patients much better. And at the same time, we expect us to continue to work with and overcome all the headwinds, such as manpower shortages, inflation and all that. These are actually common across our industry. But in health care, manpower shortage is actually something which we're actually working very hard on, which will continue to be a challenge in [ 2022 ]. And last but not least, we will continue to pursue our cluster strategy. So the key thing to emphasize here is that the team is intact, it's very strong. And even with Kelvin's resignation, we continue to work closely together and to pursue the growth strategy that we've articulated all this time. As Joerg has emphasized just now, we stick very tightly to what we are committed to do and we deliver what we're committed to do. So I'll bring this to end and we'll take Q&A.

Thank you Joe, Joerg and Evren. Before we start, we'll first take questions from the participants on the call. And if time commits, then we'll move on to the questions from the webcast. So with that, for each of the participants, if I can kindly request that you keep it to 2 questions, and then you may rejoin the queue thereafter. So with that, operator, can you please proceed with the Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of Rachel Tan of DBS.

Nice to have you on the call, Joe. 2 questions from me. I think, firstly, for Singapore, could you give us a sense in terms of how short of capacity are you at now? Or what sort of capacity are you working on with the labor? And just an update on foreign patients where they are now and as a percentage of revenue and where is it versus the 2019 numbers?

Sorry, I didn't catch your first question. Your second question is on foreign patients. First question is on capacity in Singapore. Is that correct?

Yes. Correct. I think you mentioned there is some shortages in terms of labor. So are you operating at full capacity? Or how short are you in terms of capacity?

Thank you for your question. I think these are very pertinent questions. In our Singapore operations, if you look at physical capacity, we actually -- we still have room for -- to accommodate more patients. But the constraint now is actually the supply of nurses, which for patient safety, I have actually instructed all the country and hospital CEOs that we should not compromise that. And we only operate the capacity where our nursing supply allows us to operate safely. And that is currently the constrained now. But of course, we're working closely with MOM, with MOH, we're actually working around those constraints. Just as last quarter, we have actually added [ 100 over ] nurses to our ranks, which is actually quite a significant number. So we are progressively working on that. And at the same time, to overcome this, we are also stepping up our efforts and also our call it, aggression in how we actually go after the recruitment of nurses from overseas. So that's something that we do. In terms of foreign patients in Singapore, yes, we covered and we see that the type of case mix and also the type of cases, volume of cases that come back is actually back to the pre-COVID level, which is something that is actually very encouraging. And I also want to thank a lot of our doctors and nurses for working extra hard in the initial period where Singapore opened up because there was a surge and almost a tsunami of the patients coming back, but we coped very well. So I think foreign patients, I think the short answer is that we are back to pre-COVID and we expect it to continue to go strong.

Can I follow up with -- in terms of foreign patient impact, roughly about 25% or 30% of revenue at the moment? And in terms of your capacity, are you operating 80%, 90%, [ is rough set ]?

Okay. In terms of physical bed capacity, we are operating at around 55% to 60% of the physical bed capacity. As I mentioned, that's mainly because we are also constrained by the manpower. So that's a total -- and that actually includes both domestic as well as a foreign patient. But yes, foreign patient revenue has recovered and we're actually seeing a very healthy contribution from that.

[ 25% ] of the gross patient revenue for Singapore.

Koh, I didn't catch you.

I was saying, it's close -- as per what Joe mentioned, it's close to that 25% of patient revenue, so is in terms of inpatient admissions [indiscernible] out of Singapore revenue.

My next question is really on Malaysia. Next question is on Malaysia. I think Malaysia has performed really well, it surpassed pre-COVID level, just wondering how sustainable is this recovery and how long more do you think it can go? Is fourth quarter really where normalized state will be moving forward for Malaysia operation?

So for Malaysia, I will address it in 2 parts. One is volume. The other one is the case mix and all that. If you look at volume, right, in Malaysia, health care -- private health care supply is really quite short, the demand is much bigger. So we do see a lot of room to continue to actually increase. In fact, we are actually, as we are speaking, we are expanding our capacity, say, for example, in Pantai Penang, we're adding another 100 beds to the existing infrastructure. So those are the kind of the confidence that we see in the demand in Malaysia itself. And at the same time, we're also seeing that a lot of the case mix are actually going back to the BAU case mix. In the initial part of this COVID period and during the COVID, a lot of patients are avoiding hospitals. So they only come to hospital when they are very sick. But now we are saying that they are actually getting back to normal. And when they are sick and they need operation or need treatment, they are actually more willing to come. So based on these 2 factors, we do see that there's going to be a very healthy and robust continued growth in the Malaysian operations.

Maybe just quickly, foreign patients for Malaysia, Joerg, can you give us a number?

Revenue is around 6% -- 6%, 7% and has reached pre-COVID levels. Now that's a good thing because it's pretty clear that the Malaysian organization has done a lot to really drive marketing and acquisition of foreign patients and we see this 6% only as a way mark to come to a double-digit foreign patient contribution also here in Malaysia.

Our next question comes from the line of Amanda Foo of Credit Suisse.

So 2 questions. Could I just kind of follow-up a little bit on Singapore? Of course, I understand that there's a massive shortage, but I wanted to understand in terms of bed capacity, because I understand in the last quarter, volumes were affected by 10% because of the shortage in staff. So for fourth quarter, has that improved? How does the bed closure situation look like? And also secondly, following up on that, with the Mount Elizabeth refurbishment, will this affect capacity in Singapore in the next 2 years?

Yes. Thanks, Amanda, for the question. So let me address them. I think for the Singapore capacity, definitely, we are actually reducing the number of what we call the blocked beds, where we have blocked it because of shortages of these nursing numbers. In fact, we have seen a 50% reduction in the blocked beds compared to the beginning of the year. And we do expect this number of blocked beds to continue to decrease in 2023. Currently, we have about 100 beds that are blocked -- and we expect this to decrease to about -- in the range of 20 to 30 by the end of 2023, as we ease the nursing shortage. So that's on the supply side. And your second question is on the Mount E renovation. Mount E renovation now, we're actually doing something that -- which is what I used to do when I was running [ IHH ] we call changing the engine when the plane is still flying, meaning that we are not going to close down the hospital, we are renovating the hospital in pieces. So it's like a jigsaw puzzle, where if I renovate one part, I'll close out the part and then I'll do -- I will use the other parts of the hospital. So we are trying to minimize the impact on the capacity. But having said that, some of the capacity will be affected, because some areas -- if you are too near to the renovation site, there will be noise, dust, vibrations and all that. So that's something which operationally we'll be doing. So there are a few things that -- there will be some impact by about, say, 20% of the bed capacity, but that is mitigated by a few other areas. #1 is that now we're actually working with the Sisters Hospitals in Gleneagles and as well as in Mount E Novena, to actually make sure that we schedule the patients and distribute them across, if there's a need to overflow the patients from Mount Elizabeth to Mount E Novena or to this Gleneagles Hospital. So that's one. #2 is also, when we look at it operationally, there is always a [ pick and trial ] across the week. We all know from hospitals -- I'm sure as you're covering this, you know quite well. In the middle of the week, that's where occupancy is very high. But towards the beginning of the week and the end of the week, the occupancy will come down a lot. So a lot is also operationally, how then do we work around it to even out the load. So that at least we make better use of the beginning of the week and the end of week, to actually make sure that the patient wait time for surgeries and the demand is met as much as possible. I hope that addresses your question, Amanda?

Yes, that's very helpful. And if I could squeak in 1 last question for you, if you can address this, so with some of the cost pressures that are happening, how should we look at margins for this year? Should we expect some erosion -- and related to that, has IHH introduced some price increases this year across the markets?

Yes. Thanks, Amanda. I guess, look, cost pressure is real, and we look at it from 2 sides, one is labor and the other one is primarily electricity and utility fees. If you look at the utility fee development over the last couple of months, you saw a relatively strong increase in the course of 2022. What we do see in the last couple of weeks, is that pricing from utilities is softening again. So especially, for example, here in Singapore, which is a main contributor to the inflation, but also in Turkiye, we do see a softening of the price curve for kilowatt hours in electricity, and I think that will somehow soften for us the cost pressure in 2023. On the labor, look, I think we've discussed this before, right? Of course, on the one hand, there is an increase in labor costs and on the other hand, operationally, we are looking at segregating the tasks of a nurse into more administrative tasks, where then lower compensated individuals can be onboarded, to help us improve the pay mix for our overall staff levels and I think this is working really well. So there are ways how we mitigate this. Now look, we did go through price increases, there is no question. We've done that in all of our markets, in relation to passing real cost increases on. We've seen that this works until now really well. But of course, it's an area we have to be cautious with, and we don't want to overprice here, and we want to be respectful to our customers and patients. So look, it's both, right? We need to have continuous cost management and the current utility price curve is helping us. And at the same time, we will pass price adjustments where there is a need to do that. So in short, the answer is, I do expect that margins will rather improve than reduce from the various activities that we have put in place, to improve our EBITDA mix.

Our next question comes from the line of Nicole Goh of UBS.

My question is actually, I guess, quite related to the questions that were asked previously. With regards to revenue, I think you mentioned in your outlook, Joe, that you expect revenue to actually improve in 2023. So just looking at the improvement in revenue, would that mainly come from you opening more beds, given the shortage of patients at this point in time? Or would it come from, I guess, price increases or are you actually taking market share from others? And secondly, on the nursing shortage and hence, the closure of beds, I know we covered a lot about Singapore, but what about your other markets? Are you seeing a similar sort of blocked beds that's happening there, and would that situation actually improve in the other markets?

I supposed when you asked about revenue growth, maybe I'll address it at a group level. And at the group level, I think Joerg has alluded to it just now. We are actually quite confident and we do expect 2023 for us to breach the MYR 20 billion mark, and that is something which we are very confident of and that's for overall. And how we achieve it may differ a little bit from country to country because the -- it's also a function of the health seeking behavior in this country, and also how we actually complement with the local healthcare system. So for example, in Malaysia, we do see that a lot of the growth will be from organic. Of course, we also exploring some M&A and all that, and they are always are under evaluation. That could also be another source of revenue growth. But at this stage, we will not comment any further on that. But suffice to say, organic growth will be strong in Malaysia. Likewise, for our Acibadem operations, I think that I can also ask Evren to add more color. We do expect robust growth in terms of both the demand domestically in Turkiye, as well as also [ front ] tourism into Turkiye and also in our European operations. And likewise, for Fortis and also Global hospitals in India, we do see that it's actually rebounding and growing from strength to strength. And I think as just now Amanda has asked, I think one of the key thing is also, how then do we actually tackle the inflationary pressures. There's always this talent pool balance that we have to have, which we will manage that through the various measures which Joerg has outlined. And in Singapore, indeed, I think there will be nursing shortages, but we do actually expect that some of the efforts to introduce PCAs and all that to continue to pay off. The rolling out of the PCA has been computed at 50% in half of our operations, and they will continue in 2023. So we continue to recruit them and train them and put them, so that we ease the kind of constraint from the supply side. And Singapore, I would expect that it will be a combination of the volume demand, as well as the case mix in terms of intensity. And of course, where we have to, we will actually have to pass on some of the price increases through -- passed to the patients. So that's the thing. So Evren, you want to add on the Turkiye side.

Thank you. I think the growth in Turkiye, what we are envisioning is a combination of manufacturers. As Joe said, there's an intensity factor, which is coming from basically the price increases that we pushed through. The volume is still there. Maybe just to put it in perspective, in the fourth quarter, what also really helped out our performance is, we started our operations in our newest hospital in Istanbul called Atasehir. This has then added capacity of roughly 300 beds into our network. But what we have seen, the ramp-up was much faster than what we expected, and we expect that ramp up to continue throughout '23. So that intensity, this very strong medical tourism, as well as the recent addition of Kent, we expect we will continue having strong growth in Turkiye.

Do you want to share -- how Atasehir?

Can I just follow-up on that?

Atasehir hospital?

Sure. Maybe just more details on Atasehir. We opened Atasehir middle of September. First month of operations in October, we had like 8% to 9% EBITDA margin. In December, we even reached to high teens, close to 20% EBITDA margin level. So that shows us how quick ramp-up happened in Atasehir. And as I said, this is a full-fledged private hospital of 300 beds. So we are quite happy with the ramp-up, but there are still areas -- additional capacity that needs to be filled. There are also another expansion plans with it, new departments, new physicians to be added. So we're quite happy, but also encouraged to see much better performance from Atasehir.

So mind you, that's a greenfield hospital, and the ramp-up is phenomenal.

Nicole, you had another question?

So I just wanted to follow up -- yes. Sorry, I wanted to follow up on the nursing shortage. So the nursing shortage, as you mentioned, it's in Singapore. But can I just confirm that the rest of the other markets is not as severe as it is in Singapore. And so do you also need to rollout the PCA in these other markets?

Okay. As an operator, I'll tell you that I'm never satisfied that it is enough. So I would say that in all markets, I will always tell the country managers that it is severe, because I wanted more nurses. And it is very true in Malaysia, we can still expand more. And one of the limiting factor is also in the number of nurses that we can -- the rate of recruitment of nurses Likewise, in Hong Kong, there is also a shortage of nurses. So actually, shortage of nurses is a worldwide phenomenon, and it's not just limited to Singapore alone. Just in Singapore, we have the added challenge, because the government is also recruiting very fast and government's ability to actually absorb the supply is actually quite amazing also. So therefore, a lot of emphasis, where [indiscernible] just not sharing was based on Singapore. But that doesn't mean that we don't have to overcome the challenge in Malaysia, in Hong Kong and elsewhere that we operate. It still remains a challenge.

Got it. And sorry, just one last question for me. On your India -- any updates because I think the last time -- I mean, we had -- the Supreme Court announced whatever they announced last year, I think you mentioned that you're going to see a legal counsel. So any updates on that?

So look, we are of course, in discussions with the regulator. We are in discussion with the legal counsel. We are clearly of the view the stay order is lifted. But of course, we need to respect the Indian system, and we can continue with the MTO, SEBI, the Indian regulator approves and gives us the greenlight to go ahead, we'll be respectful to the system and follow due process. But look, of course, we're not satisfied. We are held up. Our money is held in escrow, and we will do everything we can and step up our efforts. But first of all, get our money back or well, actually get the MTO through and get on the road with the MTO, increase whatever share we can increase and then move on with a continuous, very strong growth strategy. So while we are respectful to local due process and -- look, we are a foreign investor, so we need to be and should be thankful for the opportunity to participate in this market. However, we also do want to move on. We've waited a long time and I think it's really about time that we step up our [Technical Difficulty].

What kind of impact to Acibadem do you see for the upcoming Turkish presidential election in May this year? Second question from [indiscernible]. What kind of impact to Acibadem do you see for the upcoming Turkish presidential election in May this year? Second question is based on news, Turkish energy market regulatory authority indicating that energy prices for industrial use dropped 16% in January 2023 onwards. Is it the first decline in electricity bill? Can you give us the electricity charge in pre-pandemic and now? And also how much energy cost accounts for total cost of Acibadem? And last but not least, what is the reason Acibadem's EBITDA margin increased to 25.1% from 19.3% Q-on-Q? Do you see this sustainable? How is the increase of blended pricing in Acibadem in early 2023?

Thank you so much for the questions, I think it's very comprehensive. Let me take it one by one. Elections, I think there's a bit of uncertainty right now in the country, given the earthquake situation over here. But the estimates, we're still expecting elections within '23. But again, it's very early days to comment on this. With regards to the impact, obviously, we don't expect to see any impact at all, because as I mentioned several times in these analyst calls, we cater to a certain segment of the market, which is really price inelastic, very high-quality healthcare services, demand-driven and preferring our hospitals. So that's why I don't see any these type of macro or political socioeconomic developments, we don't expect to see any effect in our operations. So that's that. On the energy, let me give you some guidance. What happened in '22 is basically starting from the Russia-Ukraine war, we saw the energy tariffs increasing quite significantly starting from second quarter, and which peaked the third quarter rates, which means our energy tariff almost quadrupled in our operations, not only in Turkiye, but also our European operations. And because of that, the margin erosion coming from the effect of these utility energy costs was almost about 3, 4 basis points in Turkiye and also as well as in Europe. So when you look at our margins in '22 for the 12 months cumulative, you see a decline of 2 to 3 basis points. But on the other hand, when you look at our fourth quarter margins, you will see a resilience, which is the steady margin level. So that means that peak level has actually started to stabilize, as Joerg mentioned earlier. And as you commented on this, the energy prices are coming down. So we see that part of the fixed cost element is now stabilizing. On the EBITDA margin increase, again, it's a combination of, as I mentioned, intensity, medical tourism, receipts going higher, very strong ramp-up of [indiscernible] Hospital, which were having pre-operating costs for the -- during the first 3 quarters of the year. And then the increase of blended pricing in Acibadem, again, as Joerg mentioned, we did push through price adjustments, in line with the overall inflationary environment in the market and our January results are within our expectations.

Thanks, Evren. Perhaps we have time for one more last question because our management team has to run on for a board meeting. So operator, can we take one more question on the conference call?

The next question comes from Divya Gangahar of Morgan Stanley.

Just very short questions, I wanted a clarification on the Singapore [Technical Difficulty] nurses, pre-COVID and where are we now? I mean, I understand the patient care system will reduce the need for the overall nurses just trying to gauge what's the difference between the current strength versus what it was, say, in 2019? The second one was in China, I mean any comments on how much more asset impairment do we expect, what is the path forward, what are the various options that are being explored for that business? And lastly, on Turkish EBITDA margin, in the previous call, you may have guided for about 25%, we've achieved 27%, wanted to understand where exactly does this surprise come from, and do you think that 27% is now sustainable, especially given the comments you made on energy prices?

Okay. I will address the first question, and then I'll ask Joerg to address the second question. In terms of nursing supply, I think as with all other healthcare players in Singapore, we do see attrition every year. And what we also see is that, the supply on nurses is also replenished. And in the recent months, we are very, very thankful to MOM and also MOH for working very closely with the industry, to address these shortages. And now we are seeing actually more temporary registered nurses coming in, and they are actually conditionally registered, which then they will become full nurses. And we're actually seeing that pipeline growing. So we do expect that this -- while it continues to be tight, there are actually active efforts from all over the different sectors, private sector, government, ministry and all that are working on this together. And I would say that while it remains a challenge, it is something also that we are very appreciative and thankful for the help the MOM and also MOH has given us as well.

Let me address the other 2 questions. Look, China, I think we've made a deep cut into the asset base we have. We've basically written off majority of the goodwill we still had on the clinics. And we've taken out a material piece of asset value in the other operations. I think we are doing this step, because we believe it will relieve us and give us a little bit of headroom, a little bit of time to really get to -- China into a future stage. I'd like to focus on 2 things; one is there is a business, there are employees, there are patients, there are doctors, and we have a duty to run the business at its best and to the max as we can, while we are the owner and while we are the promoter of this business. And I think we should not confuse this with corporate activities that we do with our M&A team, where we work with CICC, where we work with banks in order to find ways how to potentially find better owners for this business, or people who want to join us and front this activity, contribute more local and stronger local context, stronger collaboration with local hospitals and local networks. I think that is the key objective of what we want to do. The derisking is in place, and we will move forward and I think this impairment has helped us to give us a little bit of headroom and breathing space to execute on this. Such topics are not easy in a complex market. The regulatory environment in China is complex and I think the partnership landscape in China is complex. So do give us time to execute on this. We've been able to close GECD, as we said we would, and we'll execute on the other objectives as well, and we'll keep you posted. But let us not forget there are patients that come to our clinics and to the hospital on a daily basis and we have a duty to care for them in the best way we can. Now Turkiye, look, 27% is fantastic, and is really back to the highs that we saw in prior quarters and really all thanks go out of the team there by having done a really fantastic job in getting this back to this performance level. The 25% we've guided to is the long-term guidance that we have for the Turkish and European perimeter. And it's fantastic if we achieve 26%, we have 27% in some quarters, that's great, but let's also remain realistic and help the organization to get through a hyperinflation situation, get through the tragedy that Turkiye is going through at this moment, be happy for the fantastic results and be realistic as to where we want to be. 25%, 26% is probably a long-term margin that we see is absolutely doable. And if the team there can change this mix over time. That's great, but let us for the coming quarters remain prudent on margin expectations that we have.

Thank you, Joerg. I think we have to address many of the questions. Unfortunately, because we have to go for a board meeting, if there are any questions that we have, we'll be happy to take that offline with you, so that we can adequately address all your queries and also your questions. On this note, I would like to thank all of you for attending today's dialog, and I really appreciate that and it's my pleasure meeting you for the first time. Thank you.

Thank you, Joerg. Thank you, Joe. Thank you, Evren. I know we do have additional questions on the webcast. We will address them offline. I will come back to you on the questions. So with that, we'll now conclude the IHH Healthcare Fourth Quarter and Full Year 2022 financial results briefing. Thank you for joining us once again. And if you have any other questions, feel free to contact me at [email protected]. So with that, operator, you may disconnect.

Thank you.

Thanks, everybody.

This concludes today's conference. Thank you for participating. You may now disconnect.