Khazanah plans US$1.5b healthcare IPO in 2H, say sources

KUALA LUMPUR (April 16): State investor Khazanah Nasional Bhd is expected to list its healthcare assets in Kuala Lumpur and Singapore in the second half (2H), a deal that could fetch US$1.5 billion (RM4.61 billion), two sources with direct knowledge of the deal told Reuters.

The dual listing could be the fourth-biggest initial public offering (IPO) in the city state's history and Malaysia's second-largest this year after the planned listing of PLANTATION [] group Felda Global Venture Holdings Sdn Bhd.

"It is coming out in the second half," a source with knowledge of the deal told Reuters on Monday. "Some preliminary discussions are being held with cornerstones and Khazanah's representatives."

The IPO will be one of the first after elections in Malaysia that are widely expected to be held in June. Analysts and investment bankers have said Malaysia's IPO pipeline has slowed ahead of the poll because of concerns of market volatility.

A second source said the listing was set for June or July, with pre-marketing to start in May. Khazanah officials were not immediately available for comment.

The first source, who declined to be identified as the details of the listing have not yet been made public, said Khazanah was still making acquisitions "to bulk up the initial public offering".

Khazanah's healthcare assets are currently parked under Integrated Healthcare Holdings (IHH), in which Japan's Mitsui & Co Ltd owns a 30% stake.

Aside from IHH's recent purchase of Turkish hospital group Acibadem AS, the unit to be listed would have assets of Singapore's Parkway Holdings, Malaysia-based Pantai Hospitals and International Medical University.

Bank of America-Merrill Lynch, Deutsche Bank AG and CIMB are joint global coordinators and book runners for the deal. Goldman Sachs, DBS and Credit Suisse are joint bookrunners, a source told Reuters in December. — Reuters



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Beyond hospital healthcare services

Healthcare and pharmaceutical sector
Maintain overweight: Recently, we hosted a healthcare corporate luncheon and invited representatives from the Association of Private Hospitals of Malaysia, KPJ Healthcare Bhd, the Malaysia Healthcare Travel Council, and Pemandu’s healthcare unit to present their views on the healthcare industry in Malaysia.

The key commonality is the potential prospects of healthcare in Malaysia as the “the hidden jewel”, in view of the inherent demand growth (both domestic and regional) and Malaysia’s strong cost competitiveness.

With the government’s target of becoming a developed nation by 2020, there has been an apparent change in lifestyle. We believe a rise in a society’s level of wealth will result in: (i) a natural increase in the diseases of the affluent; (ii) a rise in general healthcare awareness; (iii) a longer life expectancy; and (iv) an increase in the use of healthcare insurance. In turn, there will be an overall increase in demand for private healthcare services. This is positive for KPJ given its large hospital network across Peninsular Malaysia and Sabah and Sarawak.

We believe a key growth driver for the healthcare industry will be the healthcare travel segment. Given Malaysia’s geographical location, we see the strong potential in this growing industry underpinned by: (i) relatively lower healthcare costs; (ii) excellent healthcare services (no long queues, specialised doctors, world class facilities); and (iii) many ideal holiday destinations. We think there is further upside within this segment taking into account of: (i) a growing Asian market — population and wealth; (ii) the advantage of Malaysia being a Muslim majority country; (iii) government support; (iv) relatively stable political environment; and (v) relatively fewer natural disasters. In addition, there are other healthcare-related segments (education and care for the aged) that could be potential growth drivers for the industry.

We maintain our “overweight” call on the sector and we believe KPJ is the best proxy to the Malaysian healthcare industry, being the only major listed healthcare service provider (that offers reasonable market size and trading liquidity).

Year-to-date, KPJ’s share price has appreciated by 4.9% and outperformed the KLCI by 4.5%, validating our conviction in its defensive growth characteristics.

Despite the good share price performance, we believe KPJ is still undervalued (price-earnings ratio [PER] of 17 times, 15% discount to regional peers).

We maintain our “buy” rating on KPJ with an upgraded target price of RM5.85 pegged to a higher PER target of 20 times on CY12 earnings per share (previously RM5.27 based on 18 times CY12 earnings per share).

We believe the increased PER target is fair given the company’s: (i) defensive growth; (ii) new growth drivers from its new ventures (nursing school, aged care facilities and Indonesia); and (iii) scarcity premium listing of Integrated Healthcare Holdings Sdn Bhd (IHH) which will lead to further price discovery. — Affin IB Research, Feb 3


This article appeared in The Edge Financial Daily, February 8, 2012.



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Stocks to watch Genting, JCY, AirAsia, F&N, Naim Indah

KUALA LUMPUR (Feb 4): Trading on Bursa Malaysia will resume on Wednesday, Feb 8 after the extended weekend to observe the Prophet Muhammad and Thaipusam public holidays, and analysts are expecting the FBM KLCI to trend higher.

However, GENTING BHD [] shares could come under some pressure after a bill that would have ushered in the largest gambling expansion in Florida history was withdrawn by its legislative sponsor on Friday.

The bill, which proponents said could lead to 100,000 new jobs for the state, faced a probable defeat at its first stop - the House Business and Consumer Affairs Subcommittee, according to Reuters.

Rules in the Florida House of Representatives prohibit the chamber from taking further action on a bill that has failed to pass at least one committee, so the measure is dead for 2012, it said.

Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said that despite the holiday shortened session, the FBM KLCI would trend higher next week on continuous fund inflow, stronger ringgit, good progress made in the Eurozone, continuous USA economic recovery and stronger global manufacturing data.

Given the solid January gains for the local equities (FBM100 [], FBMFledgling, FBMSmallCap & FBMAce gaining 1%, 5%, 8% and 10% respectively with smaller-caps outperforming larger-caps stocks), the FBM KLCI was likely to get more momentum and follow through into February, he said.

Nazri said punters would also likely continue churning of penny stocks last week (with 90% top 40 active volume below RM1 including DBE, Focus, Tebrau, Nicorp, Compugates) even after the Chinese New Year celebration.

“We also expect growing hype on the upcoming floatation of Felda and Integrated Healthcare Holding IPO in 2Q2012 (with estimated market cap RM20 billion and RM8 billion market cap respectively) to raise interest in the local PLANTATION [] and healthcare stocks.

“Overall, we expect the market to continue rising with 1,560 level as the near term target,” he said.

The other stocks that could be in focus on Wednesday are JCY International Bhd, AIRASIA BHD [], Fraser & Neave Holdings Bhd and NAIM INDAH CORPORATION BHD []

Shares of hard-disk drive (HDD) maker JCY extended their gains last Friday ahead of the release of its earnings for the first quarter ended Dec 31, 2011 this week.

JCY had in early January, stated the group was likely to record a surge in earnings for the quarter ended Dec 31, 2011.

AirAsia’s joint venture with All Nippon Airways Co., Ltd has obtained an air operators certificate (AOC) from the Japanese Civil Aviation Bureau.

“The AOC shall enable AirAsia Japan to operate aircraft in its fleet for commercial flights to international and domestic destinations,” AirAsia said on Friday.

F&N’s 1Q earnings fell 61% to RM41.74 million RM107.08 million a year ago, due to the absence of contribution from the Coca-Cola business.

It said on Friday, the earnings were also impacted by the different timing in the accounting of operating losses in Thailand due to the severe floods last year and recovery under its business interruption insurance policy.

F&N said other factors were higher raw material costs particularly skimmed milk powder and sugar and lower sales in Dairies Malaysia.

Meanwhile, Naim Indah Corp’s major shareholder, Crest Energy Sdn Bhd is said to be in discussions with various parties to dispose of the shares.

Naim Indah however said last Friday that no details of the proposed disposal, including the price, had been finalised.



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Integrated Healthcare said to plan IPO

Integrated Healthcare Holdings Sdn Bhd, Asia’s biggest hospital operator, hired CIMB Group Holdings Bhd, Bank of America Corp’s Merrill Lynch unit and Deutsche Bank AG to manage an initial public offering in Kuala Lumpur, according to two people with knowledge of the matter.

The company, controlled by Malaysia’s sovereign wealth fund Khazanah Nasional Bhd, is considering conducting a secondary listing in Singapore, said the people, asking not to be identified as the information is private.

The IPO may raise up to US$2 billion and will take place in the first half of 2012, people with knowledge of the matter said last month. Khazanah spokesman Mohd Asuki Abas declined to comment. -- Bloomberg



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Khazanah plans to list hospital assets in 2012

Khazanah Nasional Bhd, Malaysia’s state investment company, will list hospital assets under its Integrated Healthcare Holdings Sdn Bhd unit next year, Managing Director Azman Mokhtar said in a speech in Kuala Lumpur today. He didn’t provide any details. -- Bloomberg



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'Integrated Healthcare plans US$2b IPO'

Integrated Healthcare Holdings Sdn Bhd is planning an initial public offering that may raise up to US$2 billion after completing the purchase of a Turkish hospital chain, said two people with knowledge of the matter.

The company, controlled by Malaysia’s sovereign wealth fund Khazanah Nasional Bhd, asked banks to submit proposals for the IPO by tomorrow, said the people, declining to be named as the process is private. The sale will take place in the first half of 2012 in Singapore or Kuala Lumpur, they said.

Integrated Healthcare is in advanced talks to buy a majority stake in Turkey’s Acibadem Saglik Hizmetleri & Ticaret AS for about US$1 billion, one of the people said. Integrated Healthcare, Asia’s largest hospital operator, expects to reach an agreement on the acquisition next month, the person said.

In June last year, Kuala Lumpur-based Integrated Healthcare offered S$3.5 billion (US$2.7 billion) for the rest of Singapore’s Parkway Holdings Ltd, beating a rival bid for Fortis Healthcare Ltd. It also owns Pantai Hospitals Sdn Bhd, the second-biggest hospital operator in Malaysia, and has an investment in Apollo Hospitals Enterprise Ltd.

Khazanah spokesman Mohd Asuki Abas declined to comment on the IPO of Integrated Healthcare. Dow Jones reported on the IPO earlier today, citing unidentified people.

Mitsui & Co, Japan’s second-biggest trading company, said in April it will buy a 30 percent stake in Integrated Healthcare for RM3.3 billion (US$1 billion). The purchase made Mitsui the second-largest shareholder after Khazanah, which owns 70 percent.

Khazanah said the same month that it plans to list Integrated Healthcare as Malaysia’s government pushes state organizations to divest commercial holdings to attract foreign investors and boost stock market liquidity. -- Bloomberg