I must advise you that this conference is being recorded today, 28 November 2024. Operator, 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 evening, and thank you for joining us. I'm Kelvin from IHH Investor Relations. With me today is Dr. Prem, our Group CEO. We have Mr. Dilip, our Group CFO, and Mr. Evren, the CEO of Strategy and Business Development of Acıbadem , our Turkish operations. The materials that you see are also available on the IHH website for you to download. We'll start the presentation of the three key results today by an opening remark given by Dr. Prem. We will then move into the financial highlights by Dilip. Dr. Prem will then give an update on our key operating markets across the group, followed by a brief outlook, and then we'll move to Q&A with both the participants on the conference call as well as the webcast. With that, I'll turn over the call to Dr. Prem. Dr. Prem, please.
Thank you, Kelvin. Very good evening to all of you. Thank you for joining this call. So it's been another great quarter for IHH. Strong core performance reflects our continued expansion of our growth strategy. So here are the main takeaways for our Q3 results. First of all, we saw strong growth in core revenue and EBITDA from higher patient volumes and higher revenue intensity across all markets. We also paid out an interim dividend of MYR 0.045 in October. Second, we continue to buttress IHH's leadership position. So our Island Hospital acquisition is completed. As mentioned before, Island Hospital is a highly attractive asset with strong operations in Penang, which is, of course, a very fast-growing market supported by a very large specialist pool and clinical offerings with strong operational metrics. It's also the top hospital for medical tourism in Malaysia. For this hospital, Manesar has commenced operations.
It's located in the National Capital Region, NCR, that's Delhi, and this 350-bed facility offers a wide spectrum of clinical services, which includes cardiology, orthopedics, neurology, neurosurgery, and oncology, as well as the latest high-tech equipment to provide the best possible medical outcomes and experience for our patients. Combined, Manesar and Island, these two hospitals add close to 1,000 beds to our portfolio, allowing us to significantly expand our exceptional care to more patients. Now, I want to say a little something about our antimicrobial stewardship program, or ASP. I'm proud to say that IHH Healthcare has implemented the CDC, Centers for Disease Control and Prevention, the U.S. guidelines across our 80-plus hospitals in 10 countries, making us the largest international private hospital network to do so.
So the CDC and WHO, as you know, are now emphasizing antimicrobial stewardship as essential to combating one of the big problems we have in healthcare, which is antimicrobial resistance. So our commitment to the rigorous ASP standards demonstrates our aspiration to care for good. We believe that by taking a very proactive approach on antimicrobial stewardship, we not only continue to elevate the global standards in patient care, but also protect public health through responsible care. And third, driven by clinical excellence and healthcare leadership, we continue to elevate IHH across our key markets. For example, the acquisition of Island Hospital not only enhances our position in Malaysia, but also allows us to better support the country's medical tourism aspirations. The acquisition demonstrates our continued investment in home markets with strong growth potential. So for our shareholders and investors, we remain focused on executing our growth strategy.
Where we see it makes sense, we will also accelerate the work, such as in Singapore, where our iconic Mount Elizabeth Orchard, where the bulk of the renovation will be done by the first half of 2025, which is really one to two quarters ahead of schedule. It was due to have been done by the end of 2025, right? But we've completed ahead of schedule. This is to deliver sustainable and healthy returns to our stakeholders. With that, let me hand over to our Group CFO, Dilip, to take you through our financials.
Thank you, Dr. Prem, and moving on to the next page in terms of our financial performance for the quarter, Q3 2024. As usual, you can see two sets of numbers on this page. The one on top includes MFRS 129, which is inflationary accounting. However, we will focus on our core operating performance, the blue box below, which does not include MFRS 129. As explained previously, there are various non-cash items that skew core operating performance. So overall, if you look at the blue box, we've had very strong revenue and EBITDA growth. We grew at 10% and 7% Q3 2024 versus the prior quarter, Q3 of 2023. I must also highlight here that we have an exceptional item in Q3 of 2023, which was one-off reversal of accruals that was booked for the prior period in Q3 2023.
Without that, on an apples-to-apples comparison, our EBITDA would have grown 12%, and likewise, our PATMI would have grown 9%, excluding the one-off reversal. So Q3 2024 highlighted overall a very strong performance. Looking at year-to-date, on the next slide, you can see again, across revenue, EBITDA, PACMI, XEI, we see very strong growth, double-digit growth, in fact. Again, excluding the one-off items, both in EBITDA as well as PACMI, we see an 18% and 25% growth on a year-to-date basis. You may recall that on the PACMI side, last year, we did have a one-off gain due to the disposal of our IMU University. And hence, you see a negative 26% there. Moving on to the next page. Here, we see a Q3 breakdown of performance from all RBUs. Here again, we have two boxes. The blue box is the reported currency, which is what you would see.
However, we've got a lot of feedback from sell-side analysts as well as investors asking us to show what the operational performance looked like. So we've shown a constant currency performance of all RBU, negating the impact of the ringgit appreciation, because of which there are translation effects. So as I said, again, revenue across all RBUs, very strong performance. And if you look at our EBITDA, even on a reported currency basis, very strong performance. Excluding the one-off impact that I mentioned previously, our India business would have grown at 32% over the prior year. And our group would have, in fact, grown 12% on a year-on-year basis. The next slide really shows us on a year-to-date basis, again, across all, both revenue as well as EBITDA and across all RBUs, you see very strong performance.
India, specifically, negating the one-off impact that we had in Q3 last year on an apples-to-apples basis, it shows a growth of 39% for India and an 18% growth for the group. This slide really shows our trend in terms of our performance, both in terms of EBITDA as well as in terms of our PACMI XEI performance over the last few quarters. The EBITDA margins are ex-MFRS. As you can see, the reported EBITDA margin is around 23%, which is well within the range that we've been guiding in terms of 22%-24%. Our PACMI, excluding EI and MFRS, which is a bold green line, stands at 9%. The next page really shows our strong cash flow performance. As you can see, there's been very strong cash flow that we have generated over the last quarter and year-to-date basis.
A lot of that has gone into funding our brownfield expansion plan that all of you are aware of. We had a healthy cash balance for the quarter-end September. There may be questions around how come we went and raised a sukuk while we had this cash balance. I must say here that some of this cash was further distributed in October for interim dividends. Some of this cash was also committed CapEx that we had to pay for in the coming quarter. I'm very happy to announce that the Island transaction has been completed in early November. We've funded that through a sukuk program, an unrated sukuk program for MYR 4 billion. We were over four times oversubscribed in this program, very, very good demand from all variety of investor base. Clearly, it shows that there is a lot of appetite for a paper from IHH.
We also got very compelling rates on this sukuk program that we went out to the market with. And in all earnest, we have started integration of Island Hospital from an operational perspective as well. With that, I will probably hand over back to Dr. Prem.
Thanks, Dilip. So let's start with Malaysia operations, where revenue grew by 11% from more inpatient admissions and also higher revenue intensity. Margins fell 100 basis points from last year, mainly due to higher staff costs. And EBITDA margins expanded since the previous Q4 2023 and are at about 26%, quite stable. And occupancy remained at a fairly high 73%. Revenue intensity grew by 7%. And of course, in the next slide, you will see some of the highlights. Island's acquisition remains the main feature to expand our leadership position in Malaysia. We will do so again in Malaysia by growing our capacity organically by more than 50% over the next five years. You also recall that we bought Timberland Medical Center in Sarawak. So we will continue to explore creative strategic opportunities in Malaysia. Next, Singapore. Revenue increased by 5% on higher revenue intensity. EBITDA grew 5%.
Margins are stable at 29%, so you should look at these metrics critically against the fact that one of our flagship hospitals, Mount Elizabeth Orchard, is undergoing a major upgrading program, where we have had to halve the number of operating beds since the start of this year to facilitate the renovations, so there will be some margin pressure for Singapore for the next few quarters as these numbers remain low and renovation works are accelerated. As I said earlier, we are in a very good position because construction is going at a very good pace, so we are able to bring forward the renovation, and so due to that, there will be some margin pressure. We expect by Q1, Q2 next year to add 25% of the beds back and the remainder of the beds later in 2025.
So again, for Singapore, I think one of the features you will see here is the TCF East, which we have touched on before. But TCF is basically a transitional care facility in Singapore. This is part of Singapore government's plans to decant some of the heavily occupied public sector hospitals, decant patients, stable patients who require just follow-up care into the transition care facilities. IHH Singapore has secured one of these. And so this will be one of the features of our Singapore healthcare system. I want to say something about Turkey and Europe, which relates to our Acıbadem subsidiary. Revenue and EBITDA grew 17% and 12%, respectively. Higher revenue intensity, basically. So they have done well and contribute significantly to our group. Margins came down slightly due to advertising costs for a major national campaign promoting our hospital in Amsterdam, post-expansion.
Excluding the cost from the campaign, margins would have been in the range of 22%-23%, in line with their typical performance. Occupancy was at 68%. Now, I just want to point out this is a slide we always show, the non-Lira contributions from in Turkey and from EU operations, which if you were to combine them together, you will see it is 40% of their top line. So that is one of the features of our Acıbadem business. And again, the next slide shows you something very interesting that's happening in Turkey. They have become a leading joint care center because they have recruited a top joint specialist. So the number of initiatives that are taking place around this joint center. India, where we have Fortis and Gleneagles, our two brands, continues to be a very exciting market for us. Revenue increased by 9%.
EBITDA and EBITDA margins declined by 3% year- on- year. This is due to the one-off reversal of expense in Q3, third quarter last year. Without this one-off reversal, EBITDA growth would be 32%. That's for India. Fortis, some of the features you can see here. We spoke about Manesar, the opening of the new hospital in NCR. Our Fortis Medical Research Institute, our flagship hospital in the National Capital Region, has really stepped up its oncology activities. They have opened a Gamma Knife Center. They've got an MRI Linac, state-of-the-art machine. That continues to strengthen our Fortis brand as well. Likewise, Gleneagles continues to upgrade. That's a priority for Gleneagles India, upgrading their facilities and equipment to attract both doctors and patients. Hong Kong, Gleneagles Hong Kong continues to ramp up well, steady growth, increasing the beds. Revenue grew 13%.
EBITDA spiked 63% and margins at 15%, which is really 400 basis points compared to a year ago. Occupancy is at a good 65%. And we are working towards our target for the hospital, PACMI, to be positive by early next year. Just like Singapore, Hong Kong is expanding into the ambulatory space. We've got one hospital, but they have opened several ambulatory facilities. And we have now added one more in a location called Novum Place. We've also launched Gleneagles Clinical Trials Center. Shanghai, the two businesses. We have the clinic business and we have the hospital business. And the hub and spoke model that you see in this picture, which we have been showing you, we've showed you in the past, that continues to be our focus, building a collaborative network.
I think our clinics, the ambulatory side, we are doing the reorganization, setting up a new ambulatory care center in Shanghai and Parkway Shanghai Hospital. We continue to improve the performance, essentially providing a more spectrum of healthcare services. For our lab segment, IHH Labs, 3% increase from the previous year, so stable, steady growth with margins at 22%. Test volumes went up by 8%. Now, labs, we have mentioned this several times. We want to move higher up the lab in terms of intensity, so Premier Integrated Labs PIL, which is our Malaysian laboratory, has established a reference lab partnering with Mayo Clinic, which, as you know, offers some of the very, very high-level laboratory tests, so now we can access these high-end tests in Malaysia itself, so with all the country outlooks, I would just like to summarize.
Q3 2024 continued our robust growth momentum. We paid out interim dividend of 4.5% per share on 30th October. We remain confident of our growth trajectory and we'll extend our clinical and healthcare leadership across markets, and what's going to be the focus for the rest of this year, the last quarter? Strengthening everything that we are doing, driving profitability, market leadership, and sustaining a healthy ROE, while at the same time maintaining prudent capital management and mitigating inflationary and interest rate pressures. Thank you very much, and with that, I'll hand over to Kelvin for the Q&A segment. Thank you.
Thank you, Dr. Prem. Before we start the Q&A session, I would like to remind participants that we will start with these questions on the call first, and then after that, we will move on to those from the webcast.
Given the number of participants, if I can kindly request each participant to raise no more than two questions. With that, operator, please proceed with your Q&A. Thank you.
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. We will now take our first question from the line of Yen Vu from JP Morgan. Please ask your question, Yen.
Hi, good evening, Dr. Prem and Dilip. Congratulations on a strong set of results there. I think my first question would be around India. What was really done to improve the EBITDA margin there? Because in the last quarter, we remember that Gleneagles India was actually doing quite poorly. And then the second question would be around Gleneagles Hong Kong. How many beds will be required to make a positive tatami there for the first quarter next year? Thank you.
So yeah, so in terms of the Gleneagles India, there have been several initiatives. We've looked at initiatives starting from procurement to IT cost synergy, etc. So there have been several initiatives that we've been looking at. But I think the most important thing would be a ramp-up of volume in some of our facilities and a ramp-up of intensity as well. So those are some of the key focus areas that we've been focusing on. And we can see some of the results from the effort that's been put specifically in Gleneagles India, starting from the time of the acquisition itself. So you may recall that late last year, we bought out the minority partner in Gleneagles India. And ever since, we've been instituting a lot of these changes within Gleneagles India platform.
With regards to the Hong Kong business, we are currently at about 300-320 beds. We think all going well. And again, there will be a ramp-up next year as well. I assume that probably for the full year next year, we will probably see a ramp-up of another 50 to 60 beds for 2025. And I think that will put us in good light to kind of then look at potentially a PATMI break-even as well.
Thanks, Dilip. Maybe I could just quickly follow up on that first question. What would be the competition for specialists in India? Which specialty will that? And if you could also quickly comment on Malaysia as well in terms of the specialists.
So Gleneagles India does a lot of transplant work. They're a huge transplant center. They do everything from liver transplants, kidney transplants, to even hand transplant, heart transplant, uterine transplant, pancreatic transplant. So I think that is one big business for Gleneagles India. Again, the other big business in terms of vertical is with regards to our oncology business in Gleneagles India. So there are several pillars in Gleneagles India. And from an intensity perspective, they're pretty up there from an intensity perspective. So these are some of the areas to really further focus and grow the market for Gleneagles India.
So maybe just to add some color, in India, traditionally, cardiology has been a very, very big specialty simply because of the incidence and prevalence of cardiac diseases, as you know, in the Indian population. And this is really one area which I now always try to highlight. Basically, cardiology is one specialty that has benefited from, or other patients have benefited from, preventive care. At IHH, we also keep plugging in terms of our clinical leadership. We want to talk about preventive care as well. And as you know, control of hypertension, control of diabetes, control of hypercholesterolemia, all these are factors that will make it less necessary to have cardiology interventions. Now, so it's actually a good outcome. So what's happening is now there's a shift in both Fortis and in Gleneagles to other emerging areas.
And oncology, of course, is the biggest, not just in India, worldwide, but in India because of the large numbers. And that's why you'll see FMRI is focusing a lot on oncology. Likewise, Gleneagles is also hoping to ramp up oncology. The other area is neurology and neurosurgery. So this is the other area as well. So you will see a slight specialty shift in specialty mix. And this is an area which we watch closely across all countries for disease trends, where we should shift some of our attention to. It doesn't mean that cardiology is completely downgraded, but I think it's nice for us to see preventive efforts in healthcare yielding good results. Yeah.
Okay, that's very helpful. Thank you. I'll jump back in the queue. I guess all the questions will be around on Island Hospital, but I will jump back to the queue. Thank you.
Thank you. Our next question comes from the line of Wei Quang Tay from CGS International Securities. Please go ahead, Wei Quang.
Hi, yeah, this is Wei Quang from CGS. Can you hear me? Hello?
Yes, we can. Please go ahead.
Can you hear me? Okay. Okay, sure. Thanks for taking my questions. I'd just like to check. Going into next year, I know that we have some margin pressures coming from Singapore side and probably some integration with Island Hospital for margin pressures in Malaysia as well. So just wondering if we were to look at it as a whole, though, should we still be expecting growth in terms of EBITDA going into 2025? I mean, disregarding the margin pressures. Thank you.
Thanks. Probably separate those two questions into first Singapore, just to give you a sense in terms of where we are as the exit rate in terms of, so if you look at Mount Elizabeth Orchard, that Dr. Prem mentioned about, that's a flagship hospital and contributes hugely both to our EBITDA as well as revenue in Singapore and for the group. So from an exit rate perspective, the number of operational beds as of end September is about 120 beds thereabouts. This has dropped from almost 230-240 beds from the beginning of the year. So we've almost halved Mount Elizabeth Orchard mainly from a renovation standpoint. Now, for the next three quarters, starting Q4 this year, as well as Q1 and Q2 next year, we will see that it'll probably be operating in the range of 100-120 beds.
Plus, there will also be the ancillary services, which may be shut down here and there for the full renovation. So why are we doing this? We're doing this because we want to accelerate and from a patient experience standpoint, get the hospital up and running very quickly rather than have a prolonged renovation exercise in Mounty Orchard. So what we really see is that there will be some pressure in Q4, Q1, and Q2 of next year. However, as soon as we open the facility, there will be a pretty good ramp-up immediately, and the margins will probably go back by end of 2025 to about 29% thereabouts. That's what we expect from Mounty Orchard. With regards to Malaysia, I think all of you are familiar in terms of the payer pressure that is currently there in Malaysia. We are conscious of it. We are disciplined about it.
Our price increases are very measured, as Dr. Prem has mentioned in the past, only to cover inflationary increases. However, there are, again, several initiatives on the cost side that we are undertaking. And hence, we do expect the margin to be stable at the 25% levels for Malaysia itself.
I think on Island integration, which you asked, it's actually going very well. We've got a joint group country integration team. As you know, we've announced that Kui Ling, who was the chief of staff at Island, is now the CEO of the hospital simply because of her very long stay at the hospital. Her tribal knowledge would be very good. Island is very unique in the ability to capture a large part of the medical tourism market, which we hope will also filter to some of the other countries, the other hospitals in Malaysia as well. So I think as planned, the integration is going quite well.
Thank you so much.
Thank you. Our next question comes from the line of Karthik Chellapa from Indus Capital Advisors. Please ask your question, Karthik.
Yeah, thank you very much. Congrats, team, on a good set of results. Am I audible?
Yes, you are.
Okay, great. My first question is on India. We noticed that there has been strong capacity ramp-up by hospitals, especially around the catchment area, specifically areas like Delhi, NCR, etc. And this quarter, you're running at about 77% occupancy as far as India is concerned. And you also have a capacity pipeline. So how are you thinking about occupancy in India in the medium term? And what would be some of the key assumptions on, let's say, patient volume growth or revenue growth, which drives this occupancy? That's my first question.
Thank you. Thank you very much for the question. So if you look at India, you're absolutely right. We are running at 70% plus capacity. Typically, in most private hospitals, when you're around between the 70%-75% mark, that means you're reasonably full already. Because this includes weekends, holidays, public holidays, etc. So at 70%-75%, during weekdays, you're probably running at 100% plus already. So I think it's a pretty good utilization to be at. So what are we doing to address that? As you know, both in our India platform, and especially in Fortis, they've already announced a pretty aggressive brownfield expansion plan that they're rolling out. And as Dr. Prem mentioned, the Manesar acquisition will also help in ramping up capability and what do you call capacity in our facilities in India.
So essentially, we'd like to keep average occupancy in the high 60s, early 70s. Anytime it goes above that, we look for the ability to expand brownfield, ideally, or adjacent land, or look for new sort of tactical acquisitions to fill the cluster. And that's exactly what's happening here in India for us at the moment. And there's still lots of opportunities. I know people always ask us, there are so many groups in India expanding at the same time. Is there demand? And clearly, there is. All the secular trends for private healthcare in India still continue to be there.
If you look at some of our hospitals as well, some of the bed expansions that we've put through in the last 12 to 18 months, they've been taken up very quickly. That's why we're back up in terms of utilization at 70% plus. It clearly shows that there is demand for private healthcare in most of our markets. Hence, it makes sense for us to kind of grow brownfield, and in some cases, even inorganically.
Got it. So can I take it that during this period of expansion, similar to Singapore, we might see some level of volatility in our margins, although the medium-term trajectory might still be on the way up?
Again, it depends on the size of the project. I think Mounty Orchard, especially given the size of the facility, is quite large. And also the fact that we have existing costs on Mounty Orchard, which we need to kind of absorb while we ramp down and ramp up, that's really causing the margin pressure. But from a new hospital perspective, most of the new hospitals, the way we look at it, is to ramp up bite size. I don't think, in Asia at least, we would probably open the full hospital on day one. So we would ramp up bite size. So even if there is a little bit of margin pressure, it'll probably be absorbed by the growth in EBITDA itself.
That's one of the reasons why I've been guiding everybody to say that as a group, we'd probably be somewhere in the zip code of 22% to about 24% margins.
Actually, there is a slight difference between Fortis expansion and Mount Elizabeth expansion, for example. In Mounty, a lot of expansion is taking place within the existing hospital. So there's actually a need to close certain areas, renovate, move. So there's a lot of, I would say, dislocation that's taking place. If you look at what's happening in most of the Fortis hospitals, they're building on an adjacent site, more or less. FMRI, so the main hospital continues to operate as per normal, while they built the Linac and Gamma in front. Now they're building a new wing, which is on an adjacent site, but it doesn't disturb the main hospital. Manesar, of course, was completely new. So there is less, I would say, erosion of margins in Fortis compared to Singapore.
Excellent. My final question is, if we were to look at our shareholders' funds, this quarter, the other reserves have slipped into negative, about MYR 118 million, which was about MYR 1.5 billion as of December. And what I can gather is majority of that is actually coming from a foreign currency translation difference of about MYR 1.6 billion. What does this essentially pertain to? And at what point of time do you actually see this reversing? And whether does this actually have any sort of cash impact or any impact on our covenants or debt covenant ratios also?
Yeah, so this is part of the FCTR, the Foreign Currency Translation Reserve. So again, as you see, there could be various things that could impact it. One, of course, is the translation impact itself. And again, while you see some of the, what do you call, currencies depreciating and some appreciating, you do see the fluctuation. But I think from a covenant standpoint, this has nothing to do with covenants, and it has no cash impact. So I think from that perspective, we are good.
Got it. Thank you very much. I wish the team all the very best. That's all from me.
Thank you. I'll now turn the conference over to Kelvin for questions from the webcast.
Just to read it out for the benefit of those on the call, we have a first question from BNP, Sean. The third Q has historically been the strongest quarter of the year, but the Q on Q progression has been rather muted on the top line. Any particular reasons for this weakness? Number two, could you share any takeaways from your recent engagement with insurers in light of accelerating claims? While I understand such engagements are not new, any color into the discount magnitude or changes in empowerment would be helpful.
For the first question, Dilip, would you want to kick off?
Sure. So maybe I can take the first question. So if you look at Q on Q, the third quarter here, I think while we have seen volumes recovery generally in Q3, we must also bear in mind, as I mentioned, and if you look at some of the slides that I showed previously, which has two sets of numbers, one in the blue box and the other in the regular box across various BUs, there is also a translation impact. So you must have seen in Q3, there's been some ringgit appreciation because of which we did see some translation impact where ringgit appreciated against most of our other currencies, and hence it had some translation impact. And in some cases, like Hong Kong, because of the typhoon, etc., we had some volume impact as well, which are seasonal in nature.
However, I think Q4, we do see strong bounce back in terms of numbers going into Q4.
Maybe I'll take the second part of the question, which is insurer issues. Now, this is currently mainly in Malaysia. So I want to explain that there are a few issues in healthcare which are perpetual. That means you always have it. One is post-COVID was the manpower issue, nursing shortage, and we have to deal with it. And we dealt with it very well. Today, most of our countries are either fully resourced or even slightly higher than what we would have because there's always attrition. The second issue which we always have is dealing with our, not just insurers, what I would call all the third-party payers, governments, corporates, and insurers. And at different periods, you get these issues surfacing in different countries. Many years ago, this happened in Singapore, but the central bank, MAS, allowed the insurers to hike their premiums because you need approval from them.
And that allowed because healthcare costs are always going up. It will continue to go up because of the manpower cost, cost of technology. You put in a proton beam in Singapore, and immediately the price goes up for radiation therapy. But of course, it's a much superior therapy. So hospital costs will always go up. CPI plus X, medical inflation is a bit higher. So we have to deal with our insurers as partners. But in Malaysia recently, costs went up. There were some newspaper reports that said it went up by 12.5% medical inflation. That's a huge number. But the central bank reportedly did not allow a premium increase for various reasons. But recently, you would have read that the Bank Negara is allowing them to do price increase, number one. Number two, there's going to be introduction of co-payment.
Now, we have a lot of experience with co-payment in Singapore. It was introduced more than 20 years ago, and co-payment is very good because it reduces what we call the moral hazard in medicine, in healthcare. Moral hazard means as long as a patient knows his bill is paid for in full by someone, by a third party, he will ask for all sorts of things from the doctors, and doctors will do all sorts of things for the patient as well, so I think this is now something I believe will settle the market. It is true. Some hospitals were taken or removed from the panels because it was perceived that they were higher cost. I hope that there will be a reset, but as I tell all our countries, dealing with payers, insurers is one of the key things that we've got to do in all our markets.
I think this will sort of stabilize in due course.
Move on to the second question from RHB, Chun Siong. First question, what is the reason contributed to Q on Q decline in inpatient admission volume in Turkey? Second question, do you expect the ongoing geopolitical tension in the Middle East to affect Turkish operations? Third one, how will value-based outcome model affect MY operations? And finally, fourth question, what are the reasons of year-on-year decline in EBITDA margin of your India operations? The first two questions, if I can trouble Evren.
Yeah. Thank you for the question. Maybe just a brief overview. If you look at our business in Turkey, we go through different cycles throughout the year. For example, third quarter, which starts from July, that runs all the way to September. The volumes typically come down. Patients, doctors, they take their summer leaves off. So that's one of the reasons we have the cyclicality effect in our business. Not only Turkey, actually, also in Europe, we observe that. One other thing that we have done in Turkey, because of the cyclicality of the business, because what happens is third quarter is the lowest peak, I mean, the least busiest time of the year, and then followed by the fourth quarter, where typically the volumes increase significantly as we go through the winter months. What we have done, we also had few renovation projects in our Turkish network.
So basically, what we did is we kind of ramped up those renovations, which resulted in some reduction in our bed capacity, like 5%, 3-5% level. But despite that, we maintained our EBITDA margins in Turkey during the third quarter. So that's number one. So despite all that, another area that I want to touch on with regards to the inpatient admission volume, although there was decline, if you look at our medical tourism, and then Dr. Prem went through in the slides, we have an upticking trend as far as the contribution of our foreign patient business to our top line. We started the year at 13% in the first quarter, but now we reached 17%. Some part of it's coming from the intensity. We have a 10% increase in the patient intensity coming from medical tourism. That's part of now we're taking more complex cases.
And also, we see volume increase in our foreign patients, about 3%. So that coupled with that, I think we maintained our margins in Turkey. Regarding the second question on geopolitical tension in the Middle East, we have not seen any effect, and we don't expect to see any issues with regards to business in our business within Turkey.
Okay. So I think the fourth question has been answered earlier by Dilip, but we'll take the third question, which is value-based outcome model as opposed to fee for service. Now, this has been speculated in the press quite a lot. I think Malaysian MOH has also mentioned this. I think we will have to see what exactly is the model that will come out. So DRG is one of the models that have been spoken about. Now, DRG is a very, very big word. And in fact, it has been used in many hospitals to fund, in many countries, to fund public hospitals. In Singapore, DRG has been around again for many, many years. It's used to provide subvention to the public hospitals. So it's not based on a fee for service model, but a value-based outcome model.
It hasn't really been used in the private sector or by insurers very much, maybe in the U.S. So I think this is something that we will have to see. Value-Based Outcome Model has got its benefits. It's also got its downsides as well. But it requires a lot of work. A lot of data collection is required, care pathways, and many things before it can be implemented. So I think we will wait to see, and we'll engage MOH to see what exactly they intend to do before we sort of comment on it.
Just to kind of address that last question, the fourth question, I think if you look at our India operations, which we went through our analyst deck, as I mentioned previously, there is a one-off item. In Q3 of 2023, there was a one-off reversal, which is quite sizable, because of which there seems to be a margin compression. As the note says and the callout box says in the slide, it's actually a 300 basis points expansion in margin. Actually, the EBITDA dollar value has actually grown by 32% year on year.
Thanks, Dilip. We'll move on to the next question by BOE. Paul, with Island Hospital acquisition now completed, can you provide guidance on a quantum or goodwill that may arise? Will this be amortized, and do you foresee any material integration expenses?
So great question, Paul. Thank you. I think the goodwill allocation is something that we are undertaking currently as we speak. We have a year to finalize it, and we will come back to you with specific numbers in terms of what is the exact goodwill number that we will book. In terms of expenses, there are some deal expenses that you will see in Q4, which are one-off in nature. And of course, what we do see is integration benefits. There is a clear value creation plan, as I mentioned during the Island call, that we have put in place. And we've actually put out a number of MYR 25 million, which we want for value creation in the next one year alone. So that's the way we kind of look at Island.
Thank you, Dilip. Next question from Hong Leong Kok Siang. Archie Bottom's BOR is lower Q on Q given second Q was with more holidays compared to 3Q. And why is that the case? What has A cibadem bottom done to achieve better core PBT margin this quarter? Evren, if I could trouble you.
Yeah. I think I touched on the volume, but let me talk about the other part, what we have done to increase our profit before tax. Maybe one thing that I would touch on on our balance sheet. As you know, early July, we have fully repaid all our bank debts in foreign currency. What I'm happy to report now, Archie Bottom has zero external FX loans. We cleared out all our debts, and now we apply cash flow hedges for any FX exposure, which will mean our financing costs will significantly be lower in the upcoming period.
Thanks, Evren. Next question, Global Tech Sarah Ng. Sukuk was four times oversubscribed. Was it due to the high rates of it? Should we expect higher finance costs going forward, and will Island contribution cover the higher finance cost? Perhaps I'll take that question. The Sukuk was well supported by banks in this case because it's unrated. The rates were very competitive. It's sub 4%. And if you compare against a similar maturity of MGS, the spreads were very competitive. Should we expect higher finance costs going forward? If you're referring to IHH Malaysia, yes, I think from the Island acquisition, that will go up simply because before this, there was almost zero debt at IHH Malaysia level.
If you're talking about the group, if you notice quite a few of our markets, Hong Kong, Turkey, to the extent that it's SOFR or EURIBOR based, then that tracks the SOFA rates in America, and everyone knows that's coming off. So going forward on that front, we will see some moderation on finance costs. Finally, will Island contribution cover the higher finance costs? I think based on the materials we've shared and the guidance we gave just now on the interest rates, suffice to say, on that standalone basis, there's sufficient coverage from an EBITDA perspective, keeping in mind that we have a Singapore arm that today is debt-free as well, relatively. And that cash flow generation can be also used to help to pay down and accelerate the paydown for Island debt. Next question, HSBC coverage team.
Are there any updates on utilization of land acquired through the Island acquisition? Any expansion projects in the pipeline? Following the recent unrated Sukuk issuance, are there any plans for the rated issuance? And if yes, are you able to share your outlook with regards to timeline to go to public market? Perhaps I'll take the second part first. Yes, that's the whole idea of setting up the Sukuk program. It allows for rated and unrated issuances, and flexibility in terms of the terms, as you can see from the public documents. In terms of timing, given we are already reaching year-end, if any plans do materialize with regards to the rated issuance, and keeping in mind that we just completed the unrated part, we will look at certain windows.
Perhaps first Q next year, we will see how the markets are, keeping in mind that you have a new U.S. president's inauguration on January 20th as well. In terms of the first question, Dilip, do you want to give any color in terms of?
Sure. Island is a great facility, and it kind of adds a lot of value to our cluster, as you know. We have already mentioned in the past in terms of the fact that our Penang cluster is operating full. We do not have capacity in our Penang cluster. Gleneagles Penang is at max capacity already. Pantai Penang, on the other hand, we are expanding bed capacity through brownfield expansion. Hence, the Island acquisition made a lot of sense to us to enhance and grow the Penang cluster. Right now, as we speak, they have about roughly 600 beds in terms of capacity, out of which there are 500 beds that are operational, and they are currently at about mid-50s% in terms of utilization. I think the first step would really be to kind of utilize the existing facility that they have built for 600 beds.
Thereafter, we will probably consider if at the appropriate time, I think it'll probably be a few years down the line, if there is still need for capacity, then we would probably go and use the land that we bought along with the hospital for further expansion.
Actually, we're in a great position in Penang. We could literally build a large medical campus on the new piece of land, but we are in no hurry to do it because, as Dilip said, we've still got capacity. In future, we are really talking about 10, 20, 30 years down the road, if Island continues to grow and our Penang business continues to grow because the other hospital, Gleneagles, is full up, we can really build a big medical campus on that site.
Thank you, Dilip, Dr. Prem. Next one from Hong Leong, Jake. Any further plans to utilize the available limit from IHH Sukuk Program? Yes, there is. In fact, the Sukuk was done to cater for a range of potential use of proceeds. Tactical M&A, if you recall, there was this thing mentioned about transformational M&A and tactical M&A. Keeping in mind that we have an extensive brownfield program, Dr. Prem and Dilip did share that we plan to expand 4,000 beds over the next five years. So that could be on an opportunistic basis used to finance that as well. Finally, it does depend from time to time what rates we see from the Sukuk, both rated and unrated, to the extent that it makes sense. We could tap that for even ongoing CapEx requirements. Next question, CIMB Yi Sin. What is the outlook for Archie Bottom in 4Q24?
Do you still see any translation impact in 4Q24? Evren, if I can trouble you for the first.
I'll take the first one. Outlook, as I guided to you earlier, fourth quarter is typically our peakiest, the highest peak of the year. So we expect the volume significantly increase, not only our Turkish business as well as Europe. What I can tell you, October was a good month. November so far has been pretty good. December is typically because end of the year. People tend in Turkey, in Europe, tend to use their screening programs. They make sure they get their checkups done, which creates additional business into our network. So I would expect this trend will continue and will have the highest margin of the year in the fourth quarter.
Thank you, Evren. I'll take the second part. Do you still see any translation impact in 4Q24? Presume this is for the group. If you look at the ringgit, it appreciated sharply to 3.19, and now it has come back or eased slightly back into 3.3. To the extent that this remains, then we don't foresee any more material fluctuations, but depending on which analyst you look at, the outlook for ringgit remains to be ambiguous. In this case, we might see further translation impact, but it's too early to tell.
I must also reiterate here that translation impact is one. But again, due to popular demand, we included a constant currency comparison as well in terms of growth. And there in that slide, you can see across all our BUs, we have double-digit operational growth in local currency, which again shows very, very strong operational performance, both revenue as well as EBITDA across our BUs.
Thank you, Dilip. Conscious of time, we'll take one more from the webcast, RHB Junseong. Two more follow-up questions. Can you provide health tourism revenue contribution of each country that you have a presence in? How does it perform Q on Q and Y on Y? And second question, how should we look at the competitive landscape in India from perspective of regulatory intervention, i.e., price fixing?
Sure. So let me take the question on the medical tourism contribution. You can see again in Q3 2024, we do see in Singapore almost 18% of our revenues coming from medical tourism. Again, there's been fluctuation between 18%-20% over the years. But I must say the reason why there is still a pretty high component is we see more intensive cases coming into Singapore. Despite the fact that Malaysia is growing quite healthy, and on a Q3 basis 2024, about 7% of our revenues came from medical tourism and has been growing double-digit really in terms of revenue growth in the medical tourism space. So we do see that while intensity in Singapore goes up, we see volumes in Malaysia go up as well. So it's a very interesting combination that we see here.
In terms of Turkey as well, about 17% of our revenue came in from medical tourism. And again, as you know, normally it's somewhere between 17%-20% is what we've seen in the past. So that, I think, answers the first question. The second question.
How does it perform Q on Q and Y on Y?
Yeah. So there's been a general growth in terms of volumes in Malaysia, whereas from a revenue perspective, as I mentioned in Singapore, there's been a growth from a revenue perspective because, as I said, even though the volumes have come off, the intensity in Singapore has gone up. So that has helped kind of push up revenue contribution. So there's been a growth from a revenue perspective in Singapore.
Thank you, Dilip. And perhaps just to close off the Q&A, Dr. Prem, if I can trouble you to answer the second part, how should we look at the competitive landscape in India from the perspective of regulatory intervention?
I think regulatory intervention tends to come up from time to time, sometimes through the courts, sometimes the states, but it has not really, I think, taken root in India. I mean, for me, the concept of regulatory intervention can happen in any of our markets, frankly, and I think we have to deal with regulators, but on this particular point with respect to regulatory intervention on price, I do not think it has actually taken root significantly in India at the moment.
Yeah. And because if you think about it, India is already on many accounts, the price is regulated. And I'll give you a few examples. So if you look at pharmacy, if you look at consumables, there is something called a maximum retail price, which is fixed by the government. And that's a maximum retail price at which you can sell to patients. So there is, in effect, a cap on some of the consumables and pharma. There is a cap on stents as well, medicated stents and non-medicated stents. There is a cap at which you can do. And if you look at the payers, some of the largest payers in terms of GIPSA in India or the government payers as ECHS or CGHS already have single-line billing, and they have 300-over packages. So again, the price there is fixed. So it's fairly regulated.
So I think from that perspective, despite all the regulation, we've been able to kind of grow the market, grow the market share, and grow our business in India.
Thank you, Dilip. With that, we conclude the third quarter 2024 results briefing. Thank you, Dr. Prem. Thank you, Dilip. Thank you, Evren. As always, please feel free to reach out to us if you have any further questions. The investor relations team. Thank you and good evening.
Thank you.
Thank you.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.