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Note:-  To unsubscribe, please reply this email to unsubscribe IHH May Buy More Hospitals After Initial Offer: Southeast Asia
2012-07-24 16:01:01.1 GMT


By Natasha Khan
    July 25 (Bloomberg) -- IHH Healthcare Bhd., which will
become the world’s second-biggest health-care provider by market
value when it lists today, may buy more hospitals in markets
that have unmet demand, Managing Director Lim Cheok Peng said.
    The company raised 6.3 billion ringgit ($1.98 billion)
selling shares in the Kuala Lumpur and Singapore initial public
offering, the world’s third-largest this year. Lim said IHH may
consider smaller acquisitions to add to its January purchase of
a 60 percent stake in the owner of Turkey’s largest hospital
group, Acibadem Saglik Hizmetleri & Ticaret AS, which it bought
for $826 million in cash and stock.
    “I don’t think we are prepared to do another major
acquisition like Acibadem, but if opportunities arise that fit
the overall game plan, we could certainly look at it,” Lim said
in a telephone interview.
    Kuala Lumpur-based IHH, whose IPO was 132 times subscribed
by institutions, already plans to add 67 percent more hospital
beds by 2017 to capitalize on populations that are becoming
richer and demanding better care. Increasing medical tourism and
private health insurance coverage will drive steady demand for
beds and services, said B. Kemp Dolliver, head of Asia health-
care research at Religare Capital Markets Plc.
    “It’s going to be a stable business in an unstable
world,” Dolliver, who is based in Singapore, said in a
telephone interview. “There’s rising affluence in Asia and
aging populations, so the demand dynamics look very promising.”

                        Health Awareness

    The market for health care in the Asia-Pacific will post a
compound annual growth rate of 8 percent in the years to 2015,
according to Frost & Sullivan, which IHH commissioned to do the
market analysis in its IPO prospectus. Consumer spending on
health goods and medical services in Singapore, Malaysia and
Turkey, where IHH operates, will each grow by at least 6 percent
annually between 2011 and 2016, according to Euromonitor
International, a London-based researcher.
    Countries such as Indonesia have medical infrastructure
that has yet to catch up with rising wealth of the population,
Dolliver said. Indonesia’s growing middle class with higher
disposable income and health awareness will drive demand for
private medical care such as what IHH offers, Rhenu Bhuller,
Frost & Sullivan’s Asia-Pacific vice-president for health care,
said by telephone from Singapore.
    “Singapore is almost like a hinterland to Indonesia,”
IHH’s Lim said. The country, along with Vietnam, Malaysia,
Myanmar and Bangladesh, are within a three-to-four-hour flying
radius of Singapore and among the primary sources of patients
for IHH, he said.

                        ‘Medical Travel’

    The company’s stake in Turkey’s Acibadem will help IHH
target markets in Central and Eastern Europe, the Middle East
and Africa, Lim said. Acibadem, which targets the mid- to high-
end segments of the health-care market, is a “strong fit” for
IHH, according to the IPO prospectus.
    “Strategically located between Europe, Asia and the Middle
East, Turkey has emerged as one of the most popular destinations
for medical travel,” analysts at ECM Libra Financial Group Bhd.
said in a July 6 report. “IHH offers investors exposure to a
network of healthcare-jewels,” they wrote, rating the stock
hold.
    IHH said its Acibadem operations would have contributed
37.5 percent of its sales last year if they had been integrated,
according to the prospectus. Singapore would have contributed
36.9 percent and Malaysia 21.5 percent, the company said.
    The number of millionaires in the Asia-Pacific region
exceeded those in North America for the first time last year,
according to a report in June from Capgemini SA and Royal Bank
of Canada’s wealth management unit. Singapore had the highest
proportion of millionaire households, while Hong Kong led the
rankings for the percentage of billionaires, according to Boston
Consulting Group in June.

                        Crabtree & Evelyn

    IHH’s newest facility in Singapore, Mount Elizabeth Novena
Hospital, offers only private rooms and is within a 10-minute
taxi ride from the Orchard Road shopping belt. Prices range from
S$578 ($459) for a standard room to as much as S$12,888 for the
Chairman suite, where patients can request visitors undergo a
security check.
    To counter the antiseptic smell commonly found in
hospitals, the facility uses a blend of oils in its air
conditioners. In-room amenities include a 46-inch television set
and toiletries by Crabtree & Evelyn Ltd., and patients in some
rooms have access to Acer Inc. tablet computers.
    The biggest risk for IHH is patients turning away during an
economic downturn and job losses, Bhuller said.
    “They may decide to give up that perception of luxury,”
Bhuller said. “An economic downturn can drive a portion of
patients from private to public health care.”

                        ‘Human Talent’

    As part of an industry “heavily dependent on human
talent,” IHH also faces the risk of an increase in staff cost,
Low Yee Huap, an analyst at Hong Leong Investment Bank Bhd.,
wrote in a July 19 report. Low rates the stock buy and has a 12-
month price estimate of 3.49 ringgit.
    IHH, controlled by Malaysian state investment company
Khazanah Nasional Bhd., sold shares at 2.80 ringgit each in the
IPO, it said in a July 12 statement. The $1.98 billion offering
trails the initial share sales of Facebook Inc., which raised
$16 billion, and Felda Global Ventures Holdings Bhd., which
raised $3.3 billion, among IPOs this year, according to data
compiled by Bloomberg.
    “It should be more resilient compared with other stocks
because being in health care is to a certain extent more
resilient,” said Jason Chong, Kuala Lumpur-based chief
investment officer at Manulife Asset Management (Malaysia) Sdn
Bhd. “If you are sick you have to see the doctors.”

                        Most Expensive

    At 2.80 ringgit per share, IHH is priced at 38.9 times the
earnings estimates for 2012 of Hong Leong’s Low. This would make
the company the most expensive health-care facilities stock
among 23 peers that have a market value of more than $1 billion
based on 2012 estimates, according to data compiled by
Bloomberg.
    Nashville, Tennessee-based HCA Holdings Inc., the world’s
biggest hospital operator, trades at 7.54 times projected 2012
earnings, the data show. The 23 companies have a median price-
to-earnings ratio of 14.85 times.
    Even with a steep multiple, IHH stock is rated buy by two
of the three brokerages to initiate coverage before the IPO.
    At the IPO price, IHH will have market value of more than
$7 billion, trailing only HCA and ahead of Bangkok Dusit Medical
Services Pcl, according to data compiled by Bloomberg.
    In 2010, IHH Healthcare, then known as Integrated
Healthcare Sdn., paid S$3.5 billion ($2.8 billion) for the 76.1
percent of Singapore’s Parkway Holdings Ltd. it didn’t already
own, beating India’s Fortis Healthcare Ltd. It agreed to buy
control of Turkey’s Acibadem the following year.

                        More Acquisitions

    Further acquisitions must be in markets where IHH can
continue to grow, and be accretive to earnings, Lim said. The
company would buy hospitals with a “good set of doctors that
are able to practise in those hospitals,” and local patients,
he said. “If there isn’t a good population base, there’s no
point in putting a hospital there.”
    In the short term, IHH has enough cash flow, Lim said,
while he pointed to its 35.8 percent holding in the Parkway Life
Real Estate Investment Trust as another possible source of
funding. The stake has a market value of more than S$400
million.
    “Anyone who cares about health care in the region is going
to pay attention to this company,” Religare’s Dolliver said.
“There’s limited amount of market cap to invest in in the
region, and when you adjust for the actual float, the scarcity
value is even higher.”

For Related News and Information:
Bloomberg’s biggest health-care stories: HTOP < GO>
Top Southeast Asia stories: TOP SAS < GO>
Comparison of IHH with peers: IHH MK < EQUITY> PPC < GO>
IHH’s financials: IHH MK < EQUITY> FA < GO>

--With assistance from Ee Chien Chua in Singapore and Mohammed
Hadi in Hong Kong. Editors: Lena Lee, Robert Fenner

To contact the reporter on this story:
Natasha Khan in Hong Kong at +852-2977-4630 or
nkhan51@bloomberg.net

To contact the editor responsible for this story:
Jason Gale at +61-3-9228-8733 or
j.gale@bloomberg.net

DISCLAIMER:
Information in this message is confidential. It is intended solely for the person or the entity to whom it is addressed. If you are not the intended recipient, you are not to disseminate, distribute or copy this communication. Please notify the sender and delete the message and any other record of it from your system immediately.

--

Best Regards

Max Lee (H2)

Remisier

Lim & Tan Securities Pte Ltd

HP 98361560

Email:  tmlee@limtan.com.sg

Note:-  To unsubscribe, please reply this email to unsubscribe