Welcome to IHH Healthcare Berhad's Q1 2026 analyst briefing. Thank you for taking the time to join us today given it is the eve of Hari Raya Haji. We do apologize for the delay as we were waiting for the results to be uploaded. My name is Kelvin from the IR team, joining me on the call today, Dr. Prem Kumar Nair, Group CEO, Mr. Dilip Kadambi, Group CFO, Mr. Ashok Pandit, our Group CCO. Very warm welcome to all. For today's session, we will begin with Dr. Prem sharing opening remarks for the quarter, followed by Dilip who will walk us through the financial highlights for Q1 2026. Ashok will cover key operational updates across the group, after which we will open the floor for Q&A session. Dr. Prem, over to you, please.
Thank you, Kelvin. Good evening to everyone. We will begin with our results highlight with a focus on key strategies and transformation plans, followed by operational highlights. Lastly, we will open up the floor for a Q&A session. Let me start with a quick roundup of our Q1 performance. On a constant currency basis, revenue and EBITDA grew by 16%, demonstrating the strength of our diversified portfolio. Strong performances were recorded from Malaysia, India, and Turkey. All of them delivered high inpatient volumes, higher revenue intensity while maintaining strict cost discipline. Singapore is responding to a structural shift. Performance will stabilize in H2. We will dive into greater details in the following slides. Overall, EBITDA and PATMI margins continue to be in the healthy range within our guided range. In the second box, you can see our multi-year transformation plans in action.
We are continuously undertaking group-wide initiatives to improve systems and people productivity so as to provide better, more cost-efficient care and at better cost as well. The third box summarizes our outlook. Given our diversified portfolio and size, we expect to manage our risks effectively. Our confidence in executing the growth strategies across the different countries allows us to reaffirm our guidance for the 22%-24% EBITDA margin range. We also remain on track to achieve double-digit ROE by 2028. Before going deeper into the Q1 results, I would like to outline our focus for 2026. On the left box, we have listed out each of the key plans for the countries. This is largely similar to the 2030 vision that was shared in the last quarter. Highlighting some of these, in Malaysia, we continue to grow our daycare and medical tourism.
Where needed, we will do brownfield expansions of selected hospitals. Singapore performance is bottoming out. We are working closely with payers to contract volumes for the mass to mid-market segment. Also, we are strengthening our outreach and service offerings for the local and regional affluent segment. In India, we continue to drive better integration between Fortis and Gleneagles as we continue scaling our pan-India platform. Turkey, we continue to sustain market leadership while remaining capital light. On the right, this reflects our transformation plans with the overall aim to improve, automate, and streamline processes and systems, reduce redundancies, and improve efficiencies. We have classified them into three categories. System transformation, where we harmonize systems to reduce work duplication and streamline processes. Process standardization, where we are exploring options to unify shared services to standardize processes and drive economies of scale.
Thirdly, unified data platform, where we have a strong data foundation to deploy initiatives that utilizes big data and AI processes to generate insights and improve outcomes. This slide dives further into some of the initiatives and plans that we have in our transformation roadmap. Some of which EMR, TMS, have already been successfully implemented in some countries and are rolling it out to other markets in due course. Without going into the finer details, these initiatives aim to unlock synergies, improve efficiencies, and reduce costs. Overall, our transformation journey highlights our multi-year progress to future-proof IHH and catalyze sustainable growth. With that, I will now pass the time to Dilip, who will take you through Q1 results.
Good evening to all of you. Again, thank you for joining late on the eve of Raya. We really appreciate that. Thank you, Dr. Prem. Just to build on some of the points that you mentioned, in Q1, we recorded a revenue of MYR 6.5 billion and EBITDA of MYR 1.4 billion. On a constant currency basis, revenue and EBITDA grew at 16%, demonstrating a strong and resilient growth achievable by our multinational diversified footprint. Both EBITDA and PATMI margin continues to be healthy and are within our guided range. We recorded strong performance from Malaysia, India, Turkey due to higher patient volumes and greater revenue intensity while maintaining strict cost discipline. In Singapore, we see our performance bottoming out and is expected to recover by second half of 2026. We expect margin to remain stable but will continue to grow the size of our EBITDA through volumes and economies of scale.
Furthermore, we wish to emphasize that Mount Elizabeth Orchard, the recovery is on track, and the contribution will stabilize by second half of 2026, as mentioned before. At the same time, we continue to focus on driving volumes through more tie-ups with corporates, pushing for more price-competitive payer packages with insurers. We will also expand our medical travel across the region, also find new markets such as Cambodia, Philippines, Vietnam, et cetera. Overall, we remain cautiously optimistic on our financial performance of IHH for the rest of the year 2026. As we always do, we focus on the blue box, which excludes MFRS 129. These figures represent our true operating performance of our businesses, which are resilient. Overall, we see a 3% and a 5% growth on revenue and EBITDA, respectively, following higher patient volumes and revenue intensity.
On a constant currency basis, we had a double-digit growth of 16% for both revenue and EBITDA, demonstrating our strong operating performance in each of our business units. Despite macroeconomic headwinds, our performance remained within our guided range, and we continue to be cautiously optimistic for the remainder of 2026. We exercise prudence in our capital expenditure, as I've always mentioned before, and we continue to execute our brownfield project and grow our daycare business in some of the key countries. This slide shows our financial performance trend on a quarterly basis. While our margins remain stable, our earnings continue to grow on an upward trajectory. Revenue and EBITDA ex MFRS 129 has increased by 45% and 39%, respectively, from 2022 to 2025, demonstrating dollar earnings growth.
In Q1, our EBITDA margins ex MFRS 129 stood at 22%, fully aligned with the guidance of 22%-24% that we had given earlier. Also, our core PATMI margin, which excludes MFRS 129, stood at 8%. Looking forward, we continue to maintain our guidance of EBITDA margin within the range of 22%-24%. On this slide, it shows you the performance of each of our BUs. Overall, as a constant currency basis, the group achieved a 16% growth in revenue and EBITDA, as I had mentioned previously. As mentioned earlier, we recorded a strong performance from Malaysia, India, Turkey, and Europe, most recording double-digit growth in revenue and EBITDA. Singapore, as Dr. Prem mentioned, is undergoing a structural shift and will be implementing some changes and strategies to address this challenge. These will be shared further in the next section by Ashok.
Despite the challenges, the margins of our Singapore business remain resilient at 26% for the quarter. Likewise, margin for the other countries and IHH Group continue to be within our guided range. Overall, we have continued strong growth on a constant currency basis and remain optimistic for 2026. With that, now I will pass over to Ashok to go through the operational highlights. Thank you.
Thanks, Dilip. Let's start with Malaysia. In Malaysia, while seasons, holidays has impacted inpatient admissions and occupancies, revenue and EBITDA grew by 7% and 16% on the back of higher revenue intensity. Despite growing competition in IHH, Malaysia continues its growth trajectory with continued expansion in our daycare business. Daycare business continues to grow double-digit, reflecting our efficient use of CapEx to capitalize on market demand and growth opportunities, all without increasing our bed count. We expect daycare revenues and volume to continue to increase for the rest of 2026. In Q1, Malaysia recorded 26% EBITDA margin, aligned with our guidance of mid-20s. We continue to be proactive in managing our operating cost for the rest of 2026. Diving deeper into Malaysia's medical tourism, in Q1 2026, foreign patients contributed to 15% of Malaysia's revenue. The contribution from foreign patient continues to grow on the back of robust industry demand.
Our key hospitals in Malaysia, such as PHKL, PCMC, GHJ, continue to see double-digit growth in medical tourism, underpinned by steady growth in census and higher acuity treatment. Moving forward, we expect to see continued growth for medical tourism, and this will form a larger proportion of our revenues in Malaysia. This slide dives deeper into our strategy for Malaysia going forward. Overall, we have three broad growth plans. Number one, continue building up centers of excellence that provide referrals across our network and cement our position as clinical leaders. Number two, continued expansion into daycare ACCs. Number three, brownfield expansion of our selected hospitals. More specifically, our daycare ACC strategies are, we have plans to set up ACCs within or adjacent to our existing hospitals, and at the same time, to develop up to five scalable standalone ACC platforms where we don't have presence in.
We will share them in greater detail as we execute our daycare strategy in the coming quarters. Coming to Singapore, Dr. Prem and Dilip have already given you some color of our Q1. As mentioned earlier, our operations are facing structural shift towards public healthcare consumption. Compounded with effects from the Middle East tension, rising airfares, and the depreciation of currency like the Rupee, this has caused some impact on Singapore's medical tourism. Additionally, Q1 this year was an aberration because there were two seasonal holidays packed in one quarter. There was one more than additional year, which meant five additional holidays. Consequently, our reported revenue, EBITDA, and occupancy declined on a year-over-year basis. Despite the headwinds, our margins remained at 26%, demonstrating the resilience of our Singapore business. Mount Elizabeth Orchard recovery remains on track, and the contribution expected to stabilize by second half 2026, as mentioned earlier.
We are confident that Singapore's performance is bottoming out and the recovery is expected in the second half, with the expectation that this will end the year sideways. Looking deeper into Singapore's strategy to address some of these challenges mentioned above. We have plans to put forth a three-prong plan to improve our performance in the second half of 2026. Number one, refined patient strategy. Our Mount E hospitals, both Orchard and Novena, will continue to target high-intensity and high-value cases, while our other hospitals and ACC facilities will help us drive volumes for other segments. On our volume expansion plans, one of our touchstones has been medical tourism. We are now aggressively going after more patients from non-traditional markets, including Cambodia, Philippines, to diversify our medical tourism mix.
We are also focusing on more tie-ups with corporates and are strengthening our payer relationships to roll out more price-competitive packages to drive local volumes. Lastly, we have implemented strong cost control measures to reduce cost and preserve our margins. Overall, we are confident in executing our recovery plans, and we expect Singapore operations to recover in second half of 2026, with margins to remain stable. Moving on to Turkey and Europe for our Acibadem businesses. On both reported and constant currency basis, we recorded double-digit revenue and EBITDA growth. On constant currency basis, the revenue and EBITDA growth was 45% and 73%, despite the full effect of Eid in March 2026. Occupancy is at 75%, and inpatient admissions increased by 13%, despite the addition of new beds from multiple hospitals. This demonstrates our ability to ramp up volume quickly in this market.
At the same time, our revenue intensity grew by 28% from acute patient case mix. Our EBITDA margin was 21% for Q1 2026. Touching on our foreign patients. Despite FX volatility, translation effects, our Turkish and European operations continue to perform well and have contributed significantly to the group. In Q1, our foreign patient contribution stands at 11%. The decline in foreign patient ratio was due to the strong growth in domestic revenues in Turkey, as shown in the previous slides. Volumes and revenues from medical tourism continue to increase on a year-over-year basis. Overall, Turkey's growth continues to be robust from strong local and foreign demand, 131% increase in local demand, 29% increase in foreign demand from the period 2022 to 2025. We remain confident about Turkey's business and outlook as the economy continues to recover and following a shift towards more conventional economic policies.
Moving to India. In India, we remain confident about its growth trajectory. Integration plans in the MSA continue to be on track. We are seeing positive improvements in our Gleneagles India operations. Notably, some of our Gleneagles India hospitals have started recording margins in the low-to-mid teens, a vast improvement from the single-digit margin before the MSA was implemented. Overall, inpatient admissions and revenue intensity have increased by 14% and 5% respectively. On a constant currency basis, our India operations recorded double-digit revenue and EBITDA growth of 18% and 26% respectively. The latest Fortis results are healthy with strong growth in both revenue and EBITDA. EBITDA margins for our India operations remain healthy at 20%, and occupancy stood at 71%. As the MSA progresses, we remain optimistic in seeing convergence of margins between Fortis and Gleneagles through greater clinical and operational synergies. Finally, looking at Hong Kong.
For Gleneagles Hong Kong, our operations remain flattish for Q1 due to seasonal holidays. Inpatient revenues remain flat, while revenue intensity increased by 2%. EBITDA margin stood at 15% for Q1. We continue to see double-digit growth in daycare and volumes following the opening of our new ACC, Gleneagles MediCentre in Admiralty. Overall, we continue to project growth in our Hong Kong operations and maintain our guidance for high teens in the long term. Finally, our laboratories. Our lab segment continues to grow with test volumes growing at 8%. On a constant currency basis, our labs revenue and EBITDA have grown by 2% and 10% respectively, and margins stand at 21% for Q1 2026.
We continue to grow our outreach revenues and diversify our revenue stream and expand the number of tests offered, especially the high-end tests, ones that allow doctors to make more informed decision and improve patient outcomes. With that, we have concluded our operational review. I will now pass it back to Dr. Prem to wrap up our key takeaways from Q1. Dr. Prem.
Thank you, Ashok. Our key takeaways are summarized on this slide. Firstly, we have achieved resilient growth across Malaysia, India, Turkey, and Europe. We also have a clear strategy for Singapore operations to recover in the second half of this year. Next, we have multiple transformation initiatives in play, this will help improve productivity and reduce costs. Lastly, we remain cautiously optimistic for the rest of 2026, we reaffirm our confidence for the double-digit ROE by 2028. With that, we now move to Q&A, I will pass this back to Kelvin. Thank you.
Thank you, Dr Prem, Dilip, and Ashok for the insights and updates. We will now proceed with the Q&A session. Move on to the first one, Amanda Foo from Macquarie. Thanks for the briefing and congrats on a decent set of results. Few questions from me, please. Number one, can you please share in more detail your plan to achieve double-digit ROE by 2028? What are some key initiatives and potential impact ROE we can expect? Would you reconsider your stance on China, for example, where operations have been loss-making for a while now? Number two, understand Singapore has implemented new requirements for the ISP since April this year. Could you please update us how this has impacted operations on the ground for you? Does this push back your recovery slightly from 3Q to 4Q 2026?
Third question, I noticed that your tax rate this quarter jumped to above 30% versus 20% in the past. Can you please explain what happened here, is this a one-off occurrence, and can we expect tax rate to normalize to 24% range for the financial year? Amanda, I'll take the third one first. There is a one-off tax debit in relation to Acibadem business, about MYR 150 million. Excluding this, you would see that the tax rate is in line. We can provide you with the details offline. In terms of the first question, plan to achieve double-digit ROE by 2028, what are the key initiatives and potential impact to ROE? If you look at the slides in slide 14, there were the three pillars that Dr Prem mentioned and re-emphasized.
That is to continue business execution along strategic priorities, active cost discipline and prudent capital management, and group-wide transformation efforts. All this done well would drive us towards ROE double digit by 2028. In terms of the second part, reconsider your stance on China, for example, where operations have been loss-making for a while now. Dilip, do you want to take just this part, or Dr Prem?
Sure. Dr Prem, on China.
On China, I think it's actually been doing very well in the clinic segment. As you know, we had to restructure the clinic segment some years ago. We have restructured, closed some clinics. We have consolidated several clinics into a large ambulatory care center in Shanghai in Xintiandi, and that's actually doing quite well. The clinics have broken even, and we foresee that the clinic segment would continue to do well. Parkway Shanghai Hospital, likewise, where we can put a little bit more focus, is also beginning to track upwards. You'll remember that we got the government insurance plan, Yibao Plus. That's allowed patients, a new segment of patients to come into the hospital. We've also got a tie-up with Shanghai General Hospital, working with the key opinion leader doctors who come into our hospital for their private surgeries.
There's a big uptick in certain procedures in PSH, notably in orthopedics, joint replacements, spine surgery and all that, for which we have invested in a robot as well. China has been stabilized and will continue to improve.
Maybe on the ROE, if I can chime in as well. As Dr. Prem mentioned, there are several initiatives. One is on the revenue growth itself, and I mentioned this on my slide as well. We are looking at maximizing our capital, meaning to say that's one of the reasons why we're opening more ACCs and daycare centers, which are value accretive. It adds to your revenue and earnings without adding to the need for extra capital. We are very diligent about spending capital, number one. That is one of the key initiatives that will also get us to the double-digit ROE. Second is in terms of some of the productivity measures. Apart from just cost containment and cost-cutting, also making our platform more productive.
A lot of these automation, whether it is the ERP or the EMR or the HIS and standardization of processes across all our hospitals will facilitate cost reduction as well over a period of time and FTE improvement. Given all of that would also contribute to the overall ROE story. These are some of the measures that we are actively taking in order to ensure that we hit the double-digit ROE target that we set out for ourselves by the end of 2028.
Thank you, Dr. Prem and Dilip. Just back to the second question before we move on to the next analyst question. I understand Singapore has implemented new requirements for IP since April this year. Could you please update us how has this impacted operations, and does this push back the recovery timeline? I think Dr. Prem and Ashok did share earlier that we are working on packages to drive volumes.
The first thing I want to say about the Integrated Shield Plan is there was some transition issues because the government wanted to ensure that the plans would be more affordable. Of course, the deductibles and the co-payment portion was increased. I think that has since stabilized. While there's been a shift of patients into the public sector, the insurers concomitant with the rider changes, they've also made them more affordable. I think that has since stabilized from April. We see some shift to the public hospitals, we remain confident that and we are working very closely with the insurers, as Kelvin has mentioned. We've got a large number of packages that we are working with them to have more cost-effective care for the payers, bundles, packages as well as partnerships as well.
I think you'll see in the next few months that we'll be announcing a few more partnerships with insurers as well. I think that should hold Singapore in good stead till the end of the year.
Thank you, Dr. Prem. Moving on to the next question. Chun Siong, CIMB. With the new IP framework in Singapore coming into effect from April, have you experienced any slowdown in patient footfall? I think that question has already been answered. Second, could you share the progress of efforts to improve operating efficiency in Gleneagles India? Of the six under its portfolio, how many are still underperforming, and how many have started contributing positively? What are the key challenges in consolidating Glen India and Fortis? Finally, could you share the daycare revenue contribution percentage for Malaysia and Singapore divisions? Additionally, what are your plans to expand daycare services in Malaysia? I'll take the third one first. Daycare contribution for Singapore and Malaysia is 13% and 12%, respectively.
If you look at the deck we've uploaded, there is a slide that Ashok touched upon earlier in terms of specific plans to expand daycare services in Malaysia. Circling back to the second question, Dilip, if I can trouble you to answer in terms of Glen India and Fortis updates.
Sure. As you can see in this quarter, Glen India, you can see the uptick in our India margins as well, that's mainly because of the fact that the integration has been on a successful path. There's been various things that has happened. Because it's part of the larger Fortis family, we've hired clinicians and filled the gaps that we had to do in Gleneagles India. We've also gotten a new management team in Gleneagles India and some of the hospitals to hasten growth. Plus, in terms of putting the platforms together. What do I mean by that? The procurement platform, the IT platform, a lot of those platforms, it's work in progress. Some are being done as we speak. Those will drive the next round of synergy between Fortis and Gleneagles.
Hence, Ashok mentioned that over a period of time, we do see that Gleneagles India will start converging towards the Fortis margin over a period of time.
Thank you, Dilip. Additional question from Chun Siong. Could you also share more details about your centers of excellence in Malaysia? Specifically, which subspecialties will you be focusing on, hospitals that are designated as COEs, and whether there is any accreditation body that certifies COE status? Thank you, Dr. Prem.
Malaysia has embarked on this strategy. Firstly, they have got a cluster strategy now, which is now becoming quite well known. They are bunching together some of the tertiary and quaternary hospitals with the secondary hospitals as feeders. In that process, they are moving into some of the centers of excellence, notably in oncology, orthopedics and spine, neurosurgery or neurosciences in particular, cardiology for example. Island Hospital is a good example, and they've got the Australian accreditation for a number of their centers of excellence. We will be doing the same in the Klang Valley as well and down south in Gleneagles, Johor.
Thank you, Dr. Prem. Next question comes from Divya, Morgan Stanley. Could you elaborate on the reasons for the shift to public healthcare in Singapore? What is the percentage of foreign medical tourists in first Q, and how do we make it more competitive? Just in terms of the contribution of foreign medical tourists to first Q, it is 19%, and this stays within the band of 15%-20% that Dilip has been guiding. In terms of the reasons for the shift to public healthcare Singapore, and how do we make it more competitive, I think the latter part we've addressed it by saying working on more packages, and you'll hear in the coming weeks and months there'll be sign-ups with insurers that we will announce to show that we are working towards driving volumes.
The reason for shift towards public healthcare simply is just a government push to make healthcare more affordable, and we're working within that remit. Dr. Prem, not sure if you have anything to add on at this point.
The public sector in Singapore is pretty well-resourced, as you know. Right? They do provide very high-quality care for Singaporeans. Whenever we have high inflationary pressures, like what you saw, and payer pressures, there tends to be a shift of Singaporeans to the public hospitals. Typically, after a while, this will settle, and the patients will tend to move back into the private hospitals. This has been a phenomenon in Singapore for many years now simply because the public hospitals, I would say, are pretty well-resourced. As has been pointed out, I think our hospitals continue now to provide quality care at affordable cost, working with the payers, packages, bundles, and I'm quite confident that this will see a shift of our patients back into our hospitals.
I think it's very interesting to note on medical tourism one of our big markets is Indonesia. The rupiah is at an all-time low and there were concerns expressed as to whether the medical tourism numbers would go down. I think to Singapore's credit, it has held quite steady while we see some patients from Indonesia moving into our hospitals in Malaysia, Gleneagles Johor, most notably.
Thank you, Dr. Prem. Next question comes from Shren, Goldman. FX has been a drag on earnings. Can you share how are you thinking about this, both from an earnings and balance sheet perspective over longer term? Can you guide us on top line growth for 2026? I think in terms of top line growth, we stand by the original guidance of 10%-12% growth for revenue, and accordingly, if costs are well managed, it is a mid-teens growth for EBITDA. In terms of FX, we've shared before that balance sheet we do not hedge unless it is an external liability. From an earnings perspective, it is a translation impact, hence we share the constant currency on top of the reported, showing that there's an erosion of 10-plus%. Dilip, not sure if you have anything to add.
Sure. Probably to answer that question. If you look at the underlying operational performance of each of our businesses, whether it is India, Turkey, et cetera. Operationally, they've been doing extremely well. They've been growing double digit. Whether it is Malaysia, Turkey, India, et cetera. A lot of that gets lost in translation because ringgit has been appreciating over the last few years, and when we convert our performance into ringgit, the growth number goes down quite dramatically. That's why you see on a constant currency basis, while the revenue and EBITDA grew at 16%, on a ringgit basis, which is a reported currency post-translation, it falls to a single-digit number. That is something that we cannot help. I think we keep focusing on operational performance rather than trying to do any hedges.
Apart from that, any long-term debt that we have, which does have an FX mismatch, are all hedged and we don't have any exposure to volatility on that account.
Thank you, Dilip. Next question, Joanna from Jefferies. On the ACC rollout, does it need to undergo fresh insurer empanelment process from scratch, or can the ACCs leverage existing hospital insurer relationships, Dr Prem?
Yep. No separate empanelment is required. Insurers today cover the whole range from day surgery to ambulatory care surgery, hospital, and in some countries like Singapore, they cover home care as well. I think this is really something the insurers are doing to cover cost-effective care or care in place, as we call it.
Thank you, Dr Prem. Next one comes from Megat, Citi. Few questions from me. Strong margin performance in Malaysia despite first Q being a seasonally softer quarter. Could MY surprise on the upside from margin perspective versus the mid-20s guidance? Second, can I clarify on SG guidance you mentioned sideways, flattish, I assume this is margin. Can Mount Elizabeth Orchard support revenue given the start in first Q 2026, Dilip?
Sure. I'll probably start with Malaysia. Malaysia, we've been working on costs, and we've been working on driving revenue. That's why you've seen in the past, you've seen higher margins in mid-20s. I'm happy despite, as you rightly mentioned, Megat, despite the softer revenues in Q1, given the holiday period of extra 1 week in the whole month we still ended up with about 26% margin. Overall, our guidance is still in the mid-20s, 20, 25%-26%. Obviously, our endeavor is always to try and work on various cost initiatives to defend that and probably, if possible, even grow that. On the Singapore side with regards to where we are on Mount Elizabeth, we actually saw on the Mount Elizabeth aspect, we saw a pretty interesting ramp-up. We actually saw a 6% inpatient ramp up in Mount Elizabeth despite it having a soft quarter.
Mount E is slowly coming back. It's fragile, but it is definitely coming back, and that's why we feel that the Singapore business is bottoming out. We expect things to come back up in the second half of 2026 as guided previously.
Thank you, Dilip. One more question from Magath before we jump to Eddie. Second, do you see a bigger impact to IHH Acibadem's medical tourism business due to the Middle Eastern conflict? Ashok, do you want to take this?
We don't foresee that, and I think what we saw in the first Q1 was that there was very strong uptick from domestic volumes. I think this is not a big area of concern for us.
Thank you, Ashok. One question from Eddie from RHB. Can you share your views on the MHIT and DRG in Malaysia? Are the ACC daycare and brownfield focus expansion targeting volumes from these segments? Prem.
DRG in Malaysia, there's work going on with the Ministry of Health. They're collecting data. It's not envisaged that they will do this for the private hospitals in the first phase. It'll be the public hospitals first. I think the answer to that is not for the private hospitals at the moment. Base MHIT is also slowly evolving. We are a full participant in the Base MHIT discussions and development plans. Yes, certainly our ACC and daycare would attempt to take some of the patients who are covered under MHIT because this plan is mainly targeted at the mid-level segment of the population.
Thank you, Dr. Prem. Don't see any more questions. Perhaps we'll just give it a couple more minutes for questions to come through. Otherwise, you could always reach out to us in the IR team to facilitate those questions. Right. One question from Shren. How are you thinking about monetizing Mount Elizabeth Novena? Presume that talks about potentially spinning it off into the-
Yep. We are not thinking about it at the moment.
I think, Shren, just to reemphasize, we are still very well supported by banks on the balance sheet side. Until and unless there's a very good reason for that thinking to change, not short of liquidity, Dilip.
Look, I think if you look at our balance sheet, we have enough headroom from a leverage capacity standpoint. We generate enough free cash for all our CapEx needs for the coming year. I really don't see any need to monetize Mount E Novena at this point in time.
This one by Wee Kwang, CGS. Have we seen Island Hospital contributing positively to the net of financing costs and why? Dilip, do you want to take that?
Sure. We had set ourselves a target when we took over in 2024, late 2024, that by 2026 it will be EPS accretive. I think we are very much on track to achieve that. While we also have been refinancing the Island Sukuk and have continued to reduce the interest costs we are definitely on track to make it EPS accretive by end of year two.
Thank you, Dilip. One more from Chun Song. Thank you, management team. Has management decided which hospitals in Malaysia will participate in a Base MHIT scheme, Dr. Prem?
The Malaysia team is now whilst they're working on the MHIT, the authorities, they are looking at it. We have not made a decision, but you will hear about this, I'm sure, in due course.
Thank you. Questions from Yen. Turkey has become materially larger within the portfolio and now contributes close to 35% of EBITDA. How should we think about growth going forward? At what point does Turkey become large enough that management thinks about reporting or managing it differently? Perhaps, Ashok, can I trouble you to take that?
Yeah. I think one of the aspects that we've always talked about is we are a portfolio of assets. I think in this quarter, we've seen a strong growth in Turkey, and the contribution to overall EBITDA is higher. I think we remain quite confident about the growth of the platform we have in Turkey and Europe from a growth point of view going forward and for the rest of the year. There's no plans or reporting or managing in a different manner. It's going quite well, and I think we are very happy with the operations in Turkey so far.
Thank you, Ashok. Just give it a couple more minutes. Any further questions? I recall we were tapering bed capacity expansion plan. Could management refresh with us what is the plan going forward? I think Dilip did mention that now there is an emphasis on cost management and being more efficient with capital expenditure. You could see we reduced the forecast for our CapEx from MYR 3 billion to low MYR 2 billion. Dilip, you want to add on to that?
Sure. We've identified, as you know, a couple of years back, we'd identified about 4,000 beds for brownfield expansion overall. We put a deadline of 2028. Our commitment is based on what we see from a utilization standpoint. We will still continue on that expansion part of 4,000 beds. What we are saying is it will probably take another two years, so 2030. However, that doesn't mean that our revenue growth will slow down. What we are saying is we will utilize the capital with discipline. There are other ways to grow our revenue, which includes spreading our ACCs, growing through ACCs, turning our beds faster, utilizing our capacities better. The focus on that is really in terms of operational excellence with the assets that we have, while on a selective basis, we do look at brownfield expansion, and in some cases, even greenfield expansion.
As you know, in India, we've been looking at targeted assets to complement our existing network, and we've been looking at M&A as well of smaller assets that fit into our portfolio quite nicely.
Since this question has come up, maybe I can just add. I think we are watching this space very closely because there are a lot of evolving developments in healthcare, and part of it is really the shift to the out-of-hospital sector, and that's why we are pretty aggressive with our ambulatory care strategy. This also means we can be more cost-effective in developing our facilities. Instead of focusing only on the hospital sector, we can focus on a wider range of facilities, ACCs, daycare centers, community facilities, clinics, while at the same time addressing some of the pressures from the payers who obviously want to have more cost-effective care from a group like us. This is going to be a very interesting sort of development.
Yeah. I think in the past, Dr. Prem has mentioned as well in terms of our out-of-hospital strategy and right siting of care, which is what we're doing currently, for the growth that we are expecting in the future.
Thank you, Dilip. Dr. Prem, one question from Natasha, Maybank. Can you give us some views on cost pressures for drugs and consumables since the Middle Eastern crisis? Are we expecting higher costs in second half?
Okay. There are cost pressures. We've got a committee that meets weekly that is watching this very closely. What we did right from the start is to take some measures, for example, stocking up more pharmaceuticals and consumables very early on during the crisis because we did anticipate that this might drag on for a while and would affect our procurement costs. As we all know, shipping costs, insurance costs have all gone up. Procurement costs will track upwards. We are using our strength as a group to address this on a group procurement basis. We are still getting regular prices from most of our suppliers, if this goes on, I think we do anticipate that there might be an increase in cost, which we can address in many other ways as well.
Probably to add, for pharmacy, specifically pharmacy and consumables, a lot of these items are under rate contract. We have a rate contract with our vendors for a period of time, anywhere between one to two years, all of them are bound by the rate contracts, which is what we use currently.
I think you will note also, energy prices were one of the things we were concerned with, we have got long-term contracts in most of our countries. In Turkey in particular, you would have read about the solar farm that we have opened, which is now operating at full capacity and is giving us considerable savings in energy costs in Turkey.
Thank you, Dilip, Dr. Prem. One more question from Chun Soong. Could you elaborate further on your plans to scale down CapEx in 2026? You are still on track to meet your bed expansion target of 4,000 by 2030? I think, Chun Soong, what Dilip mentioned just now was to spread it out over a larger period of time, given there are opportunities to sweat the existing assets better as there is no rush to meet the 4,000 by the initial target of 2028.
Maybe just to add, if you look at our current network, take for example, Malaysia, we already have a large network of hospitals in Malaysia. Unlike some of the new entrants where the base is smaller and the only way for them to grow is through greenfield or brownfield, we already have a large base, the idea is to really spread those assets a lot more than what we are currently doing.
Thank you, Dilip. First, we will just wait for one more question. From Magath, Citi, for Cambodia, what is the strategy here and any recent trends that you can share cadence-wise? Which of Malaysian hospitals will be in a better position to cater for Cambodia, given the price point, Dr. Prem?
Cambodia today is already a source of patients to Singapore in particular, and also to a certain degree, Malaysia. We have got representative officers, patient liaison officers in Phnom Penh as well. I think Cambodia will continue to grow as a medical tourism market for both countries.
Thank you, Dr. Prem. One question. There is a natural from the previous one. Otherwise, if there are no further questions, we can conclude the session here today. Thank you so much for dialing in, and apologies again for the delay. If there are any further questions, as always, please feel free to reach out to us in the IR team. Thank you once again for your participation and questions. Have a great day ahead.
Thank you.
Thank you.
Thank you.