IHH Healthcare sets aside 2.3% of IPO for Singapore retail investors

Heads up, Raffles Medical: the group that owns Singapore’s Parkway Holdings and other Asian hospitals will be rolling out 2.23b in shares.

52m shares or 2.3% of the share offering are reserved for Singapore retail investors. The bulk of the proceeds will be used to pay off debts. 

Here's more from OSK|DMG: 

IHH will be offering 2.23b shares, 80% of which will be new shares, for its IPO in KL and Singapore, likely in Jul 12. It is expected to raise US$2b in this IPO. Malaysia’s EPF and SWF Kuwait Investment Authority are said to be the biggest cornerstone investors. Other cornerstone investors are said to include BlackRock Inc, Capital Group, Och-Ziff Capital Management Group and IFC, the financial arm of the World Bank.

Singapore retail investors would be able to apply for 52m shares or 2.3% of the share offering, while 36m shares would be privately placed to investors. IHH intends to use the bulk of the proceeds to pay off debts. IHH has no fixed dividend policy – before it was delisted, Parkway typically distributes at least 50% of its earnings, while the last time Acibadem distributed dividends was for FY07.

Asia’s biggest hospital operator. IHH owns Turkish hospital group Acibadem AS at 60%, Singapore’s Parkway Holdings at 100%, India’s Apollo Hospitals Enterprise Ltd at 11.2%, and Malaysia’s Pantai Hospitals at 100% and International Medical University at 100%. It has a number of hospital projects providing about 3,300 beds in the pipeline, which when completed, could boost to growth.

Possible boost for the sector. The upcoming IPO could result in greater interest in Singapore’s Healthcare sector, and could possibly lend a slight boost to the share prices of the other SGX-listed healthcare providers. Assuming it raises RM6.4b, this works out to be RM2.86 / share. At an exchange rate of S$1=RM2.430, this translates to a price of S$1.18 / share or a P/E of 35x based on FY12 annualized EPS.

It should be noted that IHH is a large healthcare provider with about 4,900 beds, and significant global operations that span across Singapore, Malaysia, India and Turkey. It would be in a good position to benefit from Asia’s growing medical tourism. Regional peers’ do not have significant overseas operations. 

Hence, a large healthcare provider like IHH would be expected to trade at a premium to peers. 

Impact on Raffles Medical. Most of Raffles Medical’s shareholders are institutions, with stakes less than 5%. Given Raffles Medical’s consistent and stable growth, it is not likely that these shareholders would reduce their stakes just to free up funds to invest in another healthcare group. Even if that happens, it's unlikely to have any significant impact on Raffles Medical’s share price.

In fact, with spotlight on Singapore’s private hospitals, IHH’s IPO might help raise Raffles Medical’s brand awareness overseas.