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Cultivate Your Health Garden

As March winds down, it's with a heavy heart that I recount visits to two friends who fell victim to Dengue Hemorrhagic Fever (DBD) this month. Based on Kemenkes,  from the beginning of the year until the end of March 2024, nearly 43,271 cases of DBD had been reported across 213 districts/cities in Indonesia this year.

The highest incidences of DBD were recorded in Tangerang, Bandung Barat, Kota Kendari, Subang, and Lebak, a trend expected to continue into April amid the rainy season following El Niño.

While DBD may mimic flu-like symptoms and high fever, it's crucial to stay vigilant against the potential for Dengue Shock Syndrome (DSS), a complication that can be fatal.

DBD notoriously depletes platelet counts, sometimes dropping below 150,000/microliter due to the virus's attack. This platelet scarcity hampers blood's clotting ability, posing a risk of significant blood loss.

If you know someone battling DBD, I've come across a simple, yet potentially life-saving recipe that can help boost platelet counts alongside regular meals: Angkak  

Commonly prepared as a comforting warm soup, Angkak not only aids in elevating platelet levels but also stimulates appetite and warms the patient’s body. However, it's important to note that Angkak is not recommended for pregnant or breastfeeding mothers, as it may adversely affect breast milk.

In addition to DBD, Indonesia is currently experiencing a surge in Hand, Foot, and Mouth Disease (HFMD), commonly referred to as Singapore Flu. As of the 11th week of 2024, the Ministry of Health of Indonesia reported over 5,000 cases, with Banten province recording a high of 738 cases.

With these escalating disease outbreaks, hospitals play a crucial role in managing the situation. Among these, Hermina stands out for its pivotal contributions to addressing these health challenges.

In 2023, HEAL saw a robust 18% increase in revenue, reaching IDR 5.78 tn up from IDR 4.90 tn in 2022. Not just stopping at revenue, HEAL's net income soared by an impressive 46.64% to IDR 437.34 bn.

Source: Bloomberg

This remarkable growth was fueled by an uptick in both inpatient and outpatient numbers. 

Source: Company

HEAL's earnings came in a bit under the expected figures. It's mainly due to the high base in Q3 last year, with a spike in respiratory cases, with figures ranging between 1.5 to 1.8 million cases. The provinces most affected by these respiratory infections were Central Java, West Java, and the capital, Jakarta.

However, we see this as a buying opportunity, as we're expecting higher revenues in 1Q24 due to a notable increase in dengue fever cases, particularly since last month.

I checked two hospitals; Mitra Keluarga Bekasi, a non-BPJS hospital, is fully booked for both children and adults rooms. Hermina Grand Wisata, which accepts BPJS, is also fully booked in all classes as of this morning.

Both hospitals have confirmed a high number of inpatient admissions due to dengue fever.

Moreover, the current situation in Bandung's hospitals adds another layer of context, as they are predominantly occupied by patients suffering from DBD, showcasing an occupancy rate of 73.6%.

In my opinion, it's noteworthy that while respiratory cases outnumber those of DBD, the majority of respiratory cases are treated on an outpatient basis. In contrast, DBD cases typically require inpatient care, necessitating regular lab tests and daily blood draws to monitor platelet counts. This distinction is crucial because inpatient services, particularly those requiring frequent laboratory work, generate higher margins compared to outpatient services.

Adding to this positive outlook, Hermina is embarking on a strategic expansion this year, with plans to inaugurate four new hospitals. These facilities are strategically located in Madiun, Pasuruan, IKN, and PIK 2, showcasing Hermina's commitment to broadening its reach and enhancing healthcare accessibility.

Source: Company

Looking ahead, the company has set forth guidance projecting revenues between IDR 6.6 tn - IDR 6.7 tn, along with an EBITDA of IDR 1.89 tn—a modest 1% increase from 2023.

Given this positive outlook and Hermina's ongoing expansion efforts, we believe now is an opportune moment to buy HEAL. This perspective is bolstered by the anticipated growth and strategic openings of new hospitals, positioning Hermina as a promising entity in the healthcare sector.

Additionally, an attractive buying opportunity for HEAL is highlighted by its 2024F EV/EBITDA ratio, which is below its five-year average. This indicates that HEAL is currently undervalued as an investment option.

Source: Bloomberg

In summary, the mantra for savvy investors should be to 'stay healthy while investing and maintain your well-being.' With its solid growth prospects and commitment to expanding healthcare access, Hermina represents a compelling investment opportunity in a sector that is as vital as it is promising.


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