Making Its mark as top IPO destination
by Ronnie Teo, firstname.lastname@example.org. Posted on July 15, 2012, Sunday
Integrated Healthcare Holdings Sdn Bhd
The upcoming listing of IHH is another wellanticipated one in the country, slated to garner a market capitalisation of RM23 billion upon listing tentatively on July 23.
This IPO will be one of the largest-listed private healthcare providers in the world, coming second only to HCA Holdings Inc which is listed on the New York Stock Exchange.
“IHH is Asia’s biggest hospital operator and being in the healthcare sector makes it an attractive defensive play,” noted Ng.
“Other than that, its business focuses on highly-attractive growth markets in Asia, Central and Eastern Europe as well as the Middle East and North Africa (MENA) region.”
Ng said IHH has the potential to be a dividend stock, and that was the reason HwangIM held a significant investment in this stock for its funds as well. “It is expected to raise about RM 6.4 billion in its IPO and so far has secured 22 cornerstone investors, the most extensive list for an IPO in the region to-date.
“The profile of the cornerstone investors which comprises of international and local, sovereign and institutional funds provide the much needed boost of confidence in the stock market in the current condition,” he added.
IHH has considerable presence in the markets currently under focus. Within Malaysia, the group’s hospital network operating under the brand of Pantai and Gleneagles earned the group the second spot with a market share of 15.1 per cent.
In Singapore, the group is the largest licensed private healthcare provider, capturing approximately 44 per cent of the market share there.
The group’s latest addition of Acibadem places them as the largest private healthcare provider in Turkey in terms of number of non- Sosyal Guvenlik Kurumu (SGK) and partial-SGK beds as at December 2011.
The group also has major presence in growing economies such as China and India.
In China, it is a major foreign- owned private healthcare operator with eight medical centres and clinics in Shanghai and Chengdu. Apart from this, it also operates a medical centre in Hong Kong.
In India, it is able to tap into one of the largest populated countries in the world through Apollo Hospitals Enterprise, with more than 8,200 beds across 51 hospitals in India and internationally as at December 2011.
The group also operates a 50:50 joint venture hospital with Apollo in Kolkata.
Thus, IHH is expected to see exponential growth thanks to general increases over business segments.
The company is pegged to still be in its growth phase, as the group still operates in immature healthcare markets which offer high and robust growth potential in the long term outlook.
The listing of both FGV and IHH were deemed to be ‘smart moves’ in their respective industries as these segments – plantations and healthcare – are less exposed to business cycle fluctuations.
“Common characteristics of these two are that they have strong fundamentals, sound well-balanced business models, and are in industries where it is considered to be less risky compared to those in the luxury or lifestyle business,” noted Liang from Frost & Sullivan.
“In fact for healthcare services like IHH, in good or bad times, healthcare services are always needed.
“As widely reported by WSJ and Bloomberg both FGV and IHH attracted significant foreign investor interest, particularly on the back of the Euro crisis, many funds are looking for safe havens and reallocating funds from high risk high beta countries to low risk low beta countries with growth opportunities.”
“We expect the listing of FGV and IHH to create a momentum for the stock market and support a strong market run up towards the elections,” she underscored.
For the latter half of 2012, the weak sentiment overseas will leave players planning to list to adopt a wait-and-see approach, said HwangIM’s Ng.
Combined with the growing election risk in Malaysia in this period, the local bourse is expected to remain cautious throughout the year.
Frost and Sullivan’s Liang forewarned, “The second half of 2012 this year will have an extraordinary event which is the general election.
“Although we expect the mega IPOs to build a momentum for a strong run up towards the election, we expect cautious and defensive approach to moderate stock market performance before the election week.”
“Against the backdrop of eurozone uncertainty, not so robust economic outlook across the world and Malaysia’s upcoming election in the second half of 2012, many smaller IPOs have been put on hold except for the bigger and more high profile ones,” she added.
“However, we expect the election that is anticipated to take place in the fourth quarter of 2012 (4QFY12) to weigh most on the decision to hold off till 2013.
Hence, we can expect this inertia to moderate the listings downward.”
The good news, however, was that there was ample liquidity sitting on the sidelines, added Ng enthusiastically.
“It’s a matter of time for the money to find its way to the market again,” he said.
“The positive response on the recent two IPOs in our local bourse shows the amount of liquidity support in the system.” Looking ahead, Ng expected to see more IPOs of high quality and of defensive play, coming from non-cyclical sectors with recognisable branding to advance ahead, riding high on the demand for such stocks.
“In particular, we expect IGB Real Estate Investment Trust (REIT), Kuala Lumpur Convention Centre REIT and Astro Holdings Sdn Bhd to come on stream in 2H12,” he gave as examples.
Meanwhile, smaller players could put their IPO plans on hold, adopting a ‘wait-and-see’ approach until the situation in Europe and US stabilises.
“Once sentiment improves and there is a sustainable sign to the improvement, we expect a repeat of 2009 where the pent up supply could start coming in.
“We expect the number of listings this year to be less than last year and not more than 30 listings in total and demand should be strong for these IPOs due to the high dividend yields they offer and steady interest from government-linked funds that only invest domestically,” he predicted.