IHH Healthcare Berhad (IHH) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Fourth Quarter and Full Year 2024 Financial Results of IHH Healthcare's Analyst Briefing Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, 28th February 2025. I would now like to hand the call over to your first speaker today, Mr. Kelvin Chong from Investor Relations at IHH. Please go ahead, Mr. Chong.

Thank you. Good morning, and welcome. Thank you for joining us. I'm Kelvin from Group Investor Relations. With me today, Dr. Prem, our Group CEO; Dilip, our Group CFO; Ashok Group Chief Corporate Officer. And joining us virtually is Mr. Evren, our Deputy CEO of Strategy and Business Development in Acibadem. This is available via call and live webcast. Results are also available for download on the website. We'll begin with an opening address from Dr. Prem, give you high-level highlights on the group's performance, followed by a detailed financial status and core operating performance and narrative by Mr. Dilip. Following that, Dr. Prem will give you a country-by-country operational highlight. And after that, we can conclude with the questions and answers. With that, I'll turn over the call to Dr. Prem. Dr. Prem.

Thank you, Kelvin. Very good morning, and thank you for joining this call. It's been another great quarter for us, strong core performance reflects the continued execution of our growth strategy. Here, the main takeaway of our FY 2024 results. We delivered a robust set of financial results in 2024. We saw double-digit core growth in revenue and EBITDA on increased patient volumes and higher revenue intensity across all markets. We declared a second and final dividend of MYR 0.055, bringing the total dividend for FY 2024 to MYR 0.10, which is an 11% increase year-on-year. This is about 40% of PATMI distributed, which is above the 30% required by our dividend policy. During the year, we reinforced IHH leadership position through continued operational expansion and excellence. So during the year, we added close to 1,000 new beds across our markets. This includes beds from our Island Hospital and Timberland acquisitions. We expanded across the health care continuum in -- with our new 200-bed transitional care facility or TCF in Singapore and 2 ambulatory centers in Hong Kong and Shanghai, respectively. We strengthened our leadership in clinical excellence by consistently pushing the health care boundaries. For example, we introduced several innovative treatments like hyperthermia in Singapore as part of our cancer treatment. Next, dividends. As I mentioned earlier, a second and final cash dividend of MYR 0.055 per share is declared will be paid on 28th April 2025. We're happy to share that we've increased our ordinary dividends from MYR 0.09 to MYR 0.10 for the year, 11% increase from the previous year. Our dividend policy, as you know, is to distribute no less than 30% of our PATMI ex EI to demonstrate a disciplined approach to delivering value to shareholders. This year, we are distributing about 40% of PATMI on the back of our strong performance. So with that, I shall pass the next section to our GCFO, Dilip to cover the financial highlights. Dilip?

Thank you, Dr. Prem, and good morning to all of you. The next slide really highlights our full year performance for 2024. This includes both the MFRS 129 effect as well as our core operating performance in the blue box, which we usually focus on as this represents a more accurate picture of the operating performance. We have delivered double-digit across key matrices. There are some one-off costs that have had impact on EBITDA and PATMI. And despite that, as you can see, the performance has been really strong with double-digit growth across revenue, EBITDA as well as PATMI. PATMI is down against last year because we had a one-off sale of the IMU asset as well as the Gleneagles Chengdu. Excluding that, we would have had a PATMI growth of 13% year-on-year. As this slide shows our performance across various BUs, we've had double-digit growth across most of our BUs. We've also added a column to show the constant currency performance versus the reported currency. What this means is if you look at currency on a constant basis based on last year -- last quarter -- last year and comparing it to the current quarter. As you can see, there have been some translation impact over the year, especially in Türkiye. However, our EBITDA for the group stands at 23% for the full year, which is within the guidance of 22% to 24%. SG, Singapore operations specifically have shown a pretty healthy growth despite, as I mentioned last time, we've had capacity constraints in Mount E Orchard, where we've shut down almost half the capacity for renovation for the next 2 quarters at least. On the next slide, this slide really shows our quarterly performance. Again, as you can see, there's been some strong performance, focusing on the core operating performance in the box with the blue, we see strong growth both in terms of revenue as well as EBITDA. In terms of PATMI ex EI, we would have been at 4% growth if we were to remove some of the one-off costs in 2023, which includes some of the transactions that we did, transaction cost, which includes the Island transaction cost, the Timberland transaction costs and some revaluation of assets in Parkway Life fleet. On the next slide, we have a breakdown of our country performance and the BU performance for the quarter 4 2024. And as you can see, again, pretty strong performance on a constant-currency basis as well as on a reported currency basis. Our EBITDA for the quarter stood at 22%, which is, again, within the range of 22% to 24% as guided before. The next page gives you a snapshot of margins over the years, and our margins are solid, purple line, which is EBITDA margins ex MFRS in Q4 stood at 22%, which is, as I said, within our expectation. Our core PATMI margin, which excludes EI as well as MFRS, which is a bold green line is at 8%, again, within our 8% to 10% PATMI margin range. The next slide highlights our capital efficiency ratios. Suffice to say that we are on track for a double-digit ROE. This quarter -- or just for the full year, we closed our ROE at 9%, which is the solid blue line, and we are on course for a double-digit ROE in the years to come. This slide highlights our strong cash flows. As you can see, we've had strong cash flows from operating activities. We've also had 2 acquisitions in this, both in terms of Timberland as well as Island. We've done some financing activity through the sukuk that we did recently, and we continue to fund the brownfield expansion plan through our strong cash flows. With that, I would probably hand it back over to Dr. Prem for the operational highlights.

Thank you, Dilip. So the next slide shows you our 5-year growth plan. This is a slide that you are familiar with, where we are adding the 4,000 beds, which is a 1/3 expansion in our capacity by 2028. We've already added 1,000 of those beds across our markets this year. And the expansion really is underpinned by very strong underlying demand. And we will just barely be through the brownfield expansion that we have captured on this slide. Let's look at the individual markets. Let's start with Malaysia on the next slide. Now Malaysia showed increased inpatient admissions and greater revenue intensity. So 2 of the most important matrices that we track. Revenue grew 15%. EBITDA margins increased by 300 basis points. And they -- so they have expanded since the previous quarter in Q4 2023 and are stable at around 25%. Occupancy, again, at about 70%. So I think Malaysia is consistently performing well. Singapore, as Dilip mentioned, we have a very big project. Our iconic hospital Mount Elizabeth Orchard is undergoing a major, major renovation. And we took the opportunity because the renovations are going well to bring forward some of the planned bed renovations. So -- and that, of course, affected the financials a little bit for Singapore. But you will see that they've managed to, through various measures, right, turning around the beds faster, shorter EL loss despite maintaining higher revenue intensity. They have done very well. EBITDA has remained stable. And now the accelerated renovations that I spoke about are on track well within our time, the time frame that we have laid out, and we expect to complete it in Q2, Q3 this year. And we will be adding back about 25% of the beds in the first half of the year and the remainder later in 2025. So Singapore is also doing very well. Türkiye and Europe. Revenue and EBITDA grew 26% and 16%, respectively, higher revenue intensity mainly. Margins came off a little bit. There was some softness in cost pressures, mainly in Europe, which has affected EBITDA, but overall growth has been robust. Also note EBITDA margins have gone up in Q4 compared to the earlier part of the year. Occupancy remains at a high 72%. And this is the slide that we also show regularly that our Turkish and European operations have done well. Both have done well. In Türkiye's economic outlook -- macroeconomic outlook has improved. The economy continues to grow with the conventional economic policies. Lira has stabilized. Inflation is stable as well. So -- and overall, foreign patients -- foreign patient revenue in Türkiye is 15%. European operations contributing 26%. So that's also very stable. India, where we have got 2 brands, Fortis and Gleneagles. It's a very, very exciting market for us. Revenue increased by 8%. EBITDA grew 16%. So India is again growing continuously. Hong Kong is on a steady trajectory. We are increasing the beds in Gleneagles Hong Kong. Revenue and EBITDA both grew at 8% and margins stable at 16%. Our laboratory -- group laboratory business delivered stable growth 5% year-on-year. EBITDA grew 20% from last year, and margins have also expanded by 200 basis points. So we're continuing to expand the menu of tests that are being offered. We are moving more and more towards high-end test, especially because oncology is a very, very -- is a growing specialty in almost all our markets. So you'll find that the high-end tests are the areas where we will be continuing to expand. This slide just shows you some of the operational highlights across the group. There are lots of exciting things going on across the group. We are doing some surgeries for the first time. For example, in Prince Court, we did the endoscopic sleeve gastroplasty, obesity management. I spoke about the hyperthermia treatment in Singapore, which is adjunct treatment for cancer. Acibadem because breast cancer is the one of the top cancers for females, they've opened their 20th breast clinic in one of their hospitals. Hong Kong, just like Singapore continues to add multidiscipline clinics and ambulatory care centers. And China, which is one of our smaller operations, celebrated Parkway Shanghai's 20th anniversary. And with that, we also announced a new ACC that will open at Shanghai Plaza downtown. On sustainability front, something that is very, very important for us. We kept off the year with IHH being included in the FTSE4Good Bursa Malaysia and FTSE4Good Bursa Malaysia Shariah Index. So that demonstrates our commitment to strong ESG practices. So to reiterate the outlook. Before we move to the Q&A, full year 2024, so IHH delivered a robust and resilient set of results, illustrated by our double-digit growth and increasing dividend to our shareholders. For 2025, the focus will be on the same track, strengthening our market leadership, driving profitability and sustaining healthy ROE, all of which are on track. At the same time, maintaining prudent capital management as we navigate the headwinds in some of our markets. So thank you very much. I'll now hand over the call to Kelvin for the Q&A.

Thank you, Dr. Prem. Before we start, we'll first take questions from participants on the call, and then we move over to the webcast. If I can kindly request that each participant limit your questions to 2 per participant, you may rejoin the queue thereafter. With that, operator, please proceed with the Q&A. Thank you.

[Operator Instructions] Our first question comes from Wee Kuang Tay from CGS International Securities, Singapore.

Could you hear me? Hi. Testing. Could you hear me?

Yes, we can.

So just two quick questions from me. I think, firstly, in Singapore, would it be safe to say that margins should continue to be a little bit more pleasured in the first half of the year, given what we saw in fourth quarter was probably not a full impact from the base being taken off for the AEI? And I think second question from me is also in Singapore. I understand that IHH bought some medical suites in Singapore next to Mount E Orchard, so what are the plans to integrate? Is it really feeling just building out the medical suites with doctors on the panel? And how is this progress coming along?

So maybe I can take the first question on the margin. So as I said, we -- in the beginning of 2024, we had about 220 beds in Mount E Orchard, due to a phased renovation program by Q3, we kind of reduced it to 110. We continue to be at that number through the year-end. And I think we will slowly start ramping up those beds from Q3 onwards. And by end of the year, we will be fully up and running with 220 beds. So given that phased approach, we would still have limitation of beds despite the team trying its very best as you've seen, the impact on inpatient volumes have been limited so far, mainly because of various measures the team has taken in terms of using capacity of other hospitals and also turning around the beds faster. And all this, as you rightly pointed out, will have a little bit softness in margin, especially for Singapore. But towards the end of the year, we would pretty quickly ramp up back to where we should be around the 28%, 29% mark from an EBITDA margin perspective.

On your second question, this is in line with what we mentioned earlier in terms of our out-of-hospital health care continuum strategy, new ambulatory center, which basically will give us a big advantage in terms of creating more capacity at a hospital and therefore, also providing our patients access to the same sort of convenience in our ambulatory centers as well. So that's the thought process. Hopefully, that answers your question.

Maybe just to add on to that, Singapore is quite unique in that the government itself has a fairly big out-of-hospital strategy, as you know, the healthy SG strategy, right? So IHH Singapore is also aligning itself with some of the government aspirations. And as Ashok said, this frees up space in our hospital. We can't open another private hospital in Singapore, we free up space for us to raise the intensity within our hospitals.

And this is a strategy that we have for 2 of our key sort of markets, Singapore and Hong Kong. And I think you'll continue to see us delivering growth through alternative strategies in these 2 markets.

Next question comes from Amanda Foo of Macquarie.

Maybe I could start off with the first question. Do you think you could share with us what is your foreign patient revenue contribution from Malaysia, Singapore as well as India for the fourth quarter in 2024, please?

So if you look at our foreign patient contribution, it's been quite strong. If you look at quarter-to-date fourth quarter, Singapore, again, we continue to get close to about 18% in terms of revenue from foreign patients. Malaysia, we've -- given the recent acquisition of Island, you may recall previously Malaysia was doing about 7%. And right now, we look at for the quarter-to-date basis, we are at about 9.5% in Malaysia. And again, from a Türkiye perspective, Türkiye again continues with a strong inpatient volume at about 15-odd percent quarter-to-date 2024.

So Malaysia is the one that we see in uplift from Island's acquisition.

Yes, I understand. And if I could also follow up on India on that.

Well, if you look at Fortis, Fortis as you may have seen, quarter-to-date, about 7% to 8%. And our India operation as well gets about 5% from foreign patients for quarter-to-date.

And secondly, I think one thing I wanted to commend management is the core ROE appears to be tracking quite nicely. Can I find out if management right now would be more comfortable with sharing with us an explicit timeline as to when we can expect the double-digit ROE to be achieved? And related to that, are there any other low-hanging fruits that we can look forward to this year to enhance your ROE?

Sure. So from an ROE perspective, the work is ongoing. And as you rightly mentioned, the trajectory is right. We want to kind of hit to the double-digit ROE mark. Suffice to say, we've set ourselves up for kind of going towards the double-digit ROE in 2025 as well. So yes, just watch the space, if I can say that, for the ROE. Dilip?

So this could be something we could look forward to this year?

Yes. I think just on your second question, in a way we were going through a group transformation project, and I think more details will be shared during the course of the year. And I think one of the big focus areas of this transformation project, which is multiyear, is to see how we can keep on improving operational efficiency and delivering the margins that have a positive impact on ROE.

Next question comes from Nicole Goh from UBS.

I have two questions for you. I think, okay, first of all, I'll start with the one for IHH Malaysia, can I find out how much did Island and Timberland contribute to Malaysia's earnings in the fourth quarter?

Yes, sure. Nicole, Kelvin here. I think if you look at the full year, I think it's easy to look at it from that perspective, Island and Timberland is expected to contribute around MYR 200-odd million from an EBITDA perspective. And you'll see more of that impact in 2025.

Okay. So you're saying that in the full year like 2025, assuming that they contribute for a full year, they will contribute in total about MYR 200-odd million in terms of EBITDA. Is that correct?

Yes.

Okay. My second question is with regards to margins. So I know that, Dilip, you mentioned that we are tracking nicely within the guided range of 22% to 24%. But I also note that when you showed the chart earlier on on margins, I can see that actually, the group margins have been trending downwards. And I think recently, there's been a lot of talk, especially in Malaysia about payers being a bit unhappy, and there's a lot of pressure from payers to maybe reduce the hospital bill size or for the hospitals to actually give a discount. So I think going forward, can we expect that margins will remain at the current levels? Or would it be trending down? Or any opportunity or any chance for us to see actual -- margins actually increasing from here on?

Sure. No, thank you for the question, and I appreciate it, but yes. So to your first question to answer in terms of margins trending down. If you look at this chart that is there in the analyst deck, and if I probably start from, let's say, Q1 of 2023. We've always been in the range of 22% to 24%, which is what our guidance of the market has been. So if you look at the EBITDA margin without the MFRS impact, it's always been in the range of 22% to 24%. The reason why, we focus on the non MFRS numbers is because the MFRS numbers have hyperinflationary accounting. And a lot of that is noncash due to reindexation and FX adjustments. So if you actually look at the bold purple line starting Q1 of 2023, you can see that it's been within the range that we've said, which is 22% to 24%. So yes, so I think that's the first part. On the second part, with regards to payer pressure, I'll probably get Dr. Prem to talk about it.

Yes. Thanks, Dilip. I want to start off by saying that what you are seeing now in Malaysia is something that we, those of us who have been in the health care industry for a long time, we have seen in our various markets over the last 20, 30 years, right? And this is related to many issues. Medical inflation sometimes goes up in a particular country, then it is addressed, it comes down. So this has happened in Singapore before. It's happened in India, and this has led to various sort of regulatory measures or various interventions. So nothing new to us. And I would just say that those of us who are running hospitals, running health care companies, we have to almost take this in our stride, but deal with this. Malaysia is currently facing a period of sustained high medical inflation. It's actually very high compared to what it has in the past, and what it is in some of our other countries, which are all in single digits, right? And the Malaysian government is taking steps to address it. So that's the first thing. Secondly, right, when you have high medical inflation, it starts from the producers, consumables, equipment, right? It has to be addressed from that end. It has to be addressed from the patient and policyholders of insurance, what they are actually paying for the private health care that they are buying. And thirdly, it has to be addressed from the insurers end. So if you look at what the insurers have been asking for initially 40% to 70%, right? That has very little to do with private hospitals, I would say. It has something to do with private hospitals, but it's not the main. We do not increase prices by 40% to 70%, right? Our price increases, if you look, it's in the low single digits. We only at the most capture consumer inflation. And that's truth in all our markets, right? If you look at our margins, right, IHH margins, you're talking about 8% to 10% bottom line, right? And if we do not have that, even that kind of a margin, you begin to wonder whether you should even be in this business, right? So what is required and what has happened in all other markets is everybody comes to the table, all right, discusses how we can handle this. And it's a combination of insurers, regulators, private hospitals, even policyholders, patients, right? Because sometimes when patients have insurance, you create what's called moral hazard has it, right? Somebody else is paying my bill, so I want to have more procedures done. So appropriateness of surgery, all that's very important. As well as programs like value-based health care. IHH is very big on VDO, value-driven outcomes. We have numerous procedures, which follow the VDO principle, and we are expanding it as well. VDO means doing the appropriate thing, doing the right thing in the shortest possible time with the best recovery and outcomes, right? And that's exactly what we are doing. So Malaysia will go through some of this. Things like DRG have been muted. DRG is not easy to implement in private health care. And I think Ministry of Health Malaysia took a hard look at it. They decided that it would not be appropriate for private hospitals. It can be used for funding of public hospitals. In most countries, DRG is useful, funding of national health schemes like Australia, Japan, Korea, national insurance. But in the private sector, where there's a very wide range of plans, right, and some people buying basic plans, some buying intermediate plants, some buying high end plans, it's very difficult to implement DRG. And MOH Malaysia has met all the players and informed that they are not looking to implement DRG at the moment. So we'll have to work within the constraints of the health care ecosystem to resolve this problem. Some discounts may be given to the insurers. Insurers may decide that some hospitals, they will remove the cashless billing, all this is not new, but I'm very confident that this will stabilize in time.

Sorry, Dr. Prem, if I could just slip in just one follow-up. I think you mentioned just now about how the medical inflation in Malaysia is higher than even some of the markets that you -- the other markets that you're in. Just why is that so?

I think it has probably a lot to do with the imported -- so as you know, a lot of medical equipment, medical consumables and all that come from overseas, all right? So in a period of maybe -- the ringgit has begun to strengthen, but when it was weaker, some of these become more expensive, CT scan machines, MRI machines, some of the consumables that we use for robotic surgeries and all that, right? And I think as the ringgit strengthens and stabilizes, some of these pressures right, from medical inflation will also come down. Medical inflation is almost always higher than consumer price inflation in most countries that we operate in, right? That's because of the nature of products and the things equipment that we use in health care.

Our next question comes from Yen Voo from JPMorgan.

My first question is on Türkiye. There's a notable increase of another 900 beds in your 5-year plan. Can you share what is the rationale for the step-up in that expansion, and whether it will be executed via acquisition or greenfield and potential source of funding?

This is Kelvin. Good question. I think 900 bed addition predominantly comes from brownfield efforts. And if you saw, there was no addition in 2024. Türkiye's macroeconomic policies and the impact on the market perception adds to that. While we will continue to monitor this, several of the hospitals is really undergoing construction and expansion. So we are hopeful that this 900 beds will pan out in the next 4 to 5 years. But yes, it will be predominantly focused on brownfield.

Okay. Second question, can you give color why the net finance cost was higher in fourth quarter? That's a notable spike in Türkiye as well.

Sorry, Yes. So Yen, I think this predominantly comes from the Island acquisition, MYR 4 billion, and we closed it at very competitive financing rates yet given the quantum relative to the rest of the net debt profile of the company. This contributed to the addition in interest expense and in the coming quarters and years as the SOFR rates from the U.S. Fed cuts come in as well as some refinancing processes that we're going through, banks have been very supportive in this sector. We do expect that to moderate.

And we continue -- Yen, we continue to -- so if you, if I may add, as you've seen in the past, what we also tend to do is, it is a cash-generative business. So as and when we have cash, we tend to pay down our debt, number one. Number two, even if you look at, Kelvin mentioned about the financing for Island, we've got our financing for Ireland sub-4%, which probably is the best-in-class when it comes to the pricing of our unrated sukuk. So overall, I think we are in a good space, and we would continue to delever as we go forward.

Just a quick follow-up. But if I look at the breakdown by geography, it looks like Türkiye has the higher step-up. Typically, in every quarter, it's about MYR 120 million. Q3 was down a bit, but Q4 had additional MYR 100 million, if I back calculate on the numbers.

Evren, do you want to take that?

Sure. There are a couple of reasons why we have an increase in the financing costs. Number one is our credit card and bank commission expense is up because as our revenue increase and there are patients paying with their credit cards, that is also impacting our finance costs. As you know, 25% of our revenues are coming from out-of-pocket cash patients which pay with their credit cards. So that's one reason. The other reason for the interest expense, our leverage has gone up. One, we started utilizing medical equipment loans for our upcoming facilities, so we got some ECA financing [ Hermes ] loans that increased our interest expense as well as we also had some increase in the working capital loans in lira that also had an impact on our financing cost increase.

Our next question comes from Divya Kothiyal from Morgan Stanley.

I have two questions. The first question was on Türkiye. I just noticed that the inpatient generations in Türkiye in the fourth quarter was flattish. I just wanted to get a sense from you on how the demand outlook is and the reasons for this becoming flattish in the fourth quarter. And my second question is on Hong Kong. We see it stabilizing and at the, in terms of occupancy rates as well as margins, but what's the long-term thesis here? And this year, do we see any changes in terms of a step-up in margins and being able to go above that 20% level? What would be the glide path for that to happen?

Maybe I'll request Evren to take the first question, and then we can answer the second question.

Sure. I'll take the first one. The main reason for relatively steady occupancy for Türkiye because our capacity is at an optimum level. That's why we have several projects where we're looking to increase our capacity. We opened 1 hospital in Istanbul in February 17 of 2025, additional 121 beds. Also, we have other renovation projects in our certain hospitals to increase the operating capacity. That would be the main reason why. And then typically, the fourth quarter is from a cyclicality or business point of view is our peakest quarter. We typically see a lot of checkups coming in, in the last quarter because people in their insurance policies, they have this right to ensure they use these checkups by end of the year, which we bring -- which brings additional inpatient stream to the mix. So that's why in the fourth quarter, you typically see a jump versus the third quarter of the year, which typically falls through summer months. So that would be the main reason why we have seen an increase in our inpatient and like I said, increasing our operating occupancy.

And to probably answer your Hong Kong question, Hong Kong has kind of done well, I would say. So if you look at year-on-year growth from a revenue perspective, we've grown 16%. From an EBITDA perspective, we've kind of grown at 30-plus percent as well as from an EBIT perspective, we've also broken even as we mentioned in the previous quarters. So what is a glide path for Hong Kong? We expect to ramp up. On an average basis, we kind of had about 260 beds -- 265 beds operational through the year. That, I suppose, would go up by roughly about 50 beds for 2025, and we expect to ramp up those 50 beds through the year 2025. So overall, the glide path is good, it's promising, and we expect Hong Kong to kind of continue the growth trajectory.

Operator, given the number of questions on the webcast, perhaps we'll start taking those first. And if we can answer those in time, we'll jump back onto the call to take additional questions. The first question comes from Chun Oong, RHB, given the rising policy uncertainty in Malaysia segment, do you foresee the cancellation of GL, I think that means the guarantee letters featured by the insurance to adversely impact IHH Malaysia's revenue intensity going forward? I think just to add a little bit before and if Dr. Prem wants to jump in. As mentioned, there's quite a few discussions ongoing. Nothing is concrete as of now. But just to frame it, IHH Malaysia is 20% of the group's contribution. So if there are adverse policies and impact there too to IHH, we are cushioned by that, and IHH is well diversified to be able to, as a group, address that. Dr. Prem, do you want to add?

Yes. I just want to echo what Kelvin has stated. I've said many times that one of IHH's strengths is that we probably the most risk diversified health care group in the world, operating in 10 countries, right? So every now and then, when something happens in a particular country, we have the other countries to cushion it, and you have seen that throughout the year. This -- what you're seeing in the insurance segment now in Malaysia has happened in some of our other countries, right? And after a while, the problem is addressed, it stabilizes. And so I've substantially addressed this. Insurance companies are indeed reacting by removing cashless billing in some hospitals. And by the way, it is very selective. It's not across the group. By canceling letters of guarantees, it's requiring patients to pay and claim. These are some things that are happening. Other insurance companies, by the way, are also taking the opportunity to work with us closer in video programs in tying up with packages, so there's, I would say this is something that's moving, right, with various things that are happening. Lots of conversations are going on with Bank Negara, with Ministry of Health, with the insurers as well. So -- but we are quite confident that at some point, we will all come to a resolution on this. At the end of the day, we don't want the patients or the policy holders to be the ones suffering from these problems. So that's with Malaysia.

Thank you, Dr. Prem. The next question on the webcast comes from Natasha. I saw there was a mention on the planned development of Gleneagles Batu Lintang in Sarawak. This will be the second IHH hospital in Sarawak, I believe. Will the expansion plan in Malaysia be more concentrated within [ Bonu ]? Can you please give some color on this? Quite a few questions here. Can we please have some color on the newly acquired hospital in India? And for this, can we expect it to be more driven by M&A or organic or brownfield expansion? Third, can we please have some update on ops in Türkiye, Europe? Fourth, for China, can you please help us remind us on the progress, please? Maybe for the first two, Ashok, if I can trouble you to address this.

Sure, thanks. So I think first and foremost, we completed Timberland earlier in 2024. The acquisition has gone well, performance better than what we had expected. And when we had made the acquisition, we had mentioned that we are going to set up a new hospitals. So this is in line with our -- with what we had mentioned to all of you earlier. As of now, that's our current focus in Sarawak. Moving to India, Fortis has just announced a transaction in the Shrimann Hospital. This is in line with their cluster strategy. They are quite strong in Punjab and this adds to their footprint. The focus for us remains a brownfield expansion, which we've already sort of mentioned and outlined on our slide deck 15, but we will continue to look at M&A in a very selective manner in transactions that are accretive to us. So that -- in that sort of sense, the policy or the strategy hasn't changed. But yes, you will continue to see us looking at various opportunities in our core markets as the opportunities come through.

Thank you, Ashok. And Evren, if I can trouble you to take the third question, please, some color update on the operations in Türkiye and what are the plans in the coming years?

Operations in the fourth quarter, what I can tell you, if you split between Türkiye and Europe, we have seen rather steady inpatient and outpatient flow in Türkiye. Also same as Europe, we don't see much change from last year's fourth quarter. What I can tell you with regards to the capacity, in both Türkiye and Europe -- I mean maybe start with Türkiye. As I mentioned to you earlier, our occupancy in Türkiye for the fourth quarter was 74% to 75%. And keep in mind, this includes the weekends. If you take out the weekends, the occupancy would be much higher, close to 80%, 85% levels, which means we were quite full. So in order to address this issue, as I mentioned to you, we're trying to do some brownfield expansion, increase our bed capacity in our existing facilities. There is renovation going on in, Kent Hospital, which we acquired in 2023, that will bring in additional capacity. We opened Kartal Hospital in the first quarter of 2025. And also in Europe, we are looking to open 1 greenfield facility, which will also bring in another 195 beds in Bulgaria. So the construction work has almost complete. We look to open it in end of first quarter '25. We are also looking to start another brownfield expansion work in Rotterdam, so that's why we have several projects lined up in order to address this capacity, which will drive the numbers in both outpatient and inpatient higher in the future.

Just to address a specific point there about Sarawak, this will be our third hospital. So Timberland was the first hospital that we acquired. And with Timberland came the land to build the existing, the new Gleneagles Batu Lintang that you speak about. When that is completed and up and running, we will convert -- the current plans are to convert the current Timberland facility into specialized ambulatory care center or a smaller center. So that -- so that will give us 2 facilities in Sarawak. There is no other hospital in Sarawak, but we do have a hospital -- another hospital in East Malaysia, which is in Kota Kinabalu, Sabah state, right? And finally, please help us remind on the progress in China. China is coming along. It's a very small part of our business at the moment. We have got both clinics and hospitals. We have integrated both of them. Clinics are doing very well. In fact, they are already EBITDA positive on a run rate basis. And the hospital, we have done some restructuring of the medical staff, and that's also improving. We have announced the start of a new ambulatory care center, fairly big ambulatory care center in downtown Shanghai as well. So we are positive on China. No further expansion plans outside Shanghai.

Thank you, Dr. Prem and Ashok. Next question from Justin. Can you please share more color as to why staff costs increased year-on-year. I think just before management answers this question, we'd just like to frame this to say this contributes partially to the medical inflation that one of the analysts earlier pointed out that is very prominent in Malaysia, especially, and Dr. Prem reiterated before, there's a global shortage in nurses, so that inevitably will drive some of the staff cost increase that you see year-on-year. Dr. Prem, do you want to add anything else?

Yes. Yes. I just want to say that our policy is to ensure that we as fully resourced as possible in clinical areas, right, doctors, nurses, so that our care for patients service continues, right? So that is one area where we do not stinge. Post-COVID, there were lots of problems in getting clinical staff. But today, most of our countries are fully resourced, maybe even a little bit over resourced in view of the attrition that regularly takes place, especially in the nursing sector. So -- and of course, with that, clinical staff and shortage worldwide, governments very regularly, especially in countries like Singapore, they tend to regularly review nursing salaries. Most recently in Singapore, there was an announcement of a big increase for Allied Health, all the therapies and all that. So we also have to look at it critically, in order to retain our staff, we will have to match that or even increase beyond that. But having said that, we continue to look for ways to manage corporate staff costs because that's an area where Ashok mentioned earlier about the transformation, big transformation efforts taking place, introduction of technology, introduction of new systems, AI to do things efficiently at the back, right? And this is in areas like business office billing, right, finance, procurement. So these are areas where we look for savings to ensure that we keep our staff costs as low as possible, but we definitely will not want to cut back on clinical staff.

Thank you, Dr. Prem. Next question from Chee Siang. There's quite a few things here. I think 3 main buckets. First is to do with Island hospitals numbers and statistics. How should we look at the margin and bottom line contribution in the next 2 years given high financing costs for the acquisition? Second part, about Singapore, how do we look at the margin and revenue in first half compared -- 2025 compared to the fourth quarter 2024. At what stage is Project Renaissance at? And actually, 4 parts to this, sorry. Can you remind us how many beds have been removed and will be added? And then why Acibadem foreign tourist share is declining since 2022? And how should we look at effective tax rate in 2025 and beyond? Is the reported 15.8% effective tax rate something we should take reference from? I think on the first part, I'll take it first. As Dilip mentioned, our financing cost is probably the best-in-class that we could get. Banks were very supportive. The MYR 4 billion amount was 4x oversubscribed. And in terms of the addition in numbers we shared earlier, it's about MYR 200 million EBITDA addition on a full year basis. And Dilip did mentioned before, one of the key criteria for acquisition that management and Board looks at is that it should be ROE accretive year 2, latest year 3. In terms of Singapore, how is the revenue EBITDA margin outlook? It would compress just a little bit in fourth quarter 2024, and you will see more of that in the first half of 2025 because the iconic Mount E -- Elizabeth Hospital project works are accelerating. At what stage, we expect that to be completed? By third Q of this quarter that was brought forward because based on the construction works, there was some confidence and visibility on accelerating. Beds addition, as we've already mentioned, we added about 1,000 beds across our group this year. Why Acibadem foreign tour share is declining? Part of that has to do with how lira has been stabilizing, not so much just directly to do with how the foreign tourists versus local is doing. But the lira, as you know, was buffeted by macroeconomic uncertainty, that has since stabilized. That's why you see the foreign tourist share declining so-called to say in parenthesis. In terms of effective tax rate, well, I think there's multiple jurisdictions and tax authorities, I'm not sure if we can quite comment on this. Dilip, if you can do...

So look, I think looking at our current structure and current tax regime, I think around about our historic effective tax rate is something that we are comfortable with at this point in time, unless and until the regime in any of our operating countries change dramatically.

Thank you, Dilip. Next question, how will DRG impact IHH's dividend growth and revenue? In terms of DRG, I think that's still being discussed how that pans out still.

DRG will -- well, Malaysian Ministry of Health has stated that they will not be implementing DRG.

And yes, in terms of dividend growth, you can take some guidance from our revised dividend policy. We do endeavor to pay 30% of our PATMI. In terms of revenue addressed earlier, IHH's one of the key strengths that Dr. Prem mentioned, Malaysia is 20% of total numbers. And if and when any impact comes from discussions between insurance companies, government and hospital, we are cushioned to address that.

Yes. In terms of also revenue growth as IHH itself, as we've stated before, I think somewhere in the range of 10% to 12% is something that we are reasonably comfortable with going forward into the next few years as well, given our strong pipeline. But do also bear in mind that our current utilization is in the 70s already. So we will need the brownfield capacities to really kind of start growing more volume and, hence, revenue growth. But we're kind of comfortable in the range of 10% to 12%.

Thank you, Dr. Prem, Dilip. Next question, what is your total operational beds in 4Q '24? I think we look at yearly numbers instead, and we already shared we added 1,000 beds in 2024. Final question on the webcast comes from Justin. Are insurance companies asking for discounts? And if so, how much? Dr. Prem intimated earlier that it's a range between 30%, 40% to up to 70%, but how much of this actually transpires, I think that's an ongoing discussion.

Okay. To clarify, the 40% to 70% is the increased that insurance companies asked -- increase in premiums to policyholders that insurance companies put up to Bank Negara. As we know now, Bank Negara has only approved a 10% increase per year for the next 3 years, all right? So there should be some pressure. Insurance companies are asking for discounts in the range of 10% to 40% from hospitals. You can clearly see the margins at which we operate. So some of these discounts are not realistic. But the good thing is that there are discussions going on, right, with all insurance companies. And I mentioned about some of the initiatives that hospitals and insurers are taking, right? The video program, the packages, the group negotiating for better prices for the equipment we buy, the ringgit stabilizing. So I think there are several positive things that are happening. To me, the noise level has come down quite a lot since the -- when it first started. There's a public account committee in the Malaysia's parliament that is now conducting a lot of interviews with various stakeholders. And I'm sure at the end of this all, we'll have a much greater visibility on what's happening and how to move forward, right? So I think we can wait for some of these things to play out.

Thank you, Dr. Prem. We have time for one more question. Perhaps we'll take it on the call. Operator, if there's any questions from participants on the call, we can take one more. Thank you.

[Operator Instructions] Thank you, moderator. I see no further questions on the audio side.

If that's the case, operator, thank you. Thank you, Dr. Prem, Dilip, Ashok and Evren for helping with the questions. This marks the end of the full year results presentation. Thank you, and the materials are again available online, if you wish to download them.

Thank you.

Thank you very much.

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