Strong debut for IHH Healthcare (5225)

GOOD SHOWING: Shares register 10.4pc and 10.1pc premium in Malaysia and Singapore, respectively


IHH Healthcare Bhd, the world's third largest initial public offering (IPO) this year, defied overall weak market sentiments to stage a sound trading debut in Malaysia and Singapore yesterday.

The hospital operator, the second largest in the world by market value after United States' HCA Holdings Inc, opened simultaneously in both markets at a 9.6 per cent premium over the offer prices of RM2.80 and S$1.113 (RM2.81), respectively.

In Malaysia, the shares rose to as high as RM3.19 before ending the day at RM3.09, fetching a 10.4 per cent, or 29 sen, premium.

Some 390.3 million shares changed hands, making IHH, which is controlled by state investment firm Khazanah Nasional Bhd, the day's most actively traded counter.

"It is a very decent debut, considering its rich valuation and the fact that the market has been weak in the last few days," said Choo Swee Kee, executive director at fund management firm TA Investment Management Bhd, which manages some RM700 million in investments.

The FTSE Bursa Malaysia KLCI benchmark index , which had been on a four-day losing spell, gained 0.15 per cent to close at 1,635.09. Most other markets in Asia, including Singapore, ended the day lower.

IHH will be included in the 30-stock FBM KLCI from August 1, taking the place of MMC Corp Bhd.

IHH shares in Singapore rose to as high as S$1.245 before closing at S$1.225, fetching investors a 10.1 per cent premium.
Managing managing director Lim Cheok Peng, in a press conference here minutes after the debut, said the group was "quite happy" with the opening price and urged investors to hold the shares for the long-term.

In three to five years, the group hoped to have doubled in size and profitability and to replace HCA as the world's number one hospital operator, he added.

"This stock is not for speculation. I would urge you to grow with IHH and I am sure you will be rewarded in the longer term," he remarked.

Most analysts who track the stock have a positive recommendation on it, with their fair values ranging from as low as RM3.15 (Affin Research) to as high as RM3.49 (Hong Leong Investment Bank).

ECM Libra has a "hold" call on it with a target of RM2.94.
At RM2.80 a share, IHH is priced at 38.9 times Hong Leong's earnings estimates for the group for this year.
Analysts consider it to be the most expensive healthcare stock among its top peers globally.

The group, in its IPO prospectus, announced plans to add another 3,300 hospital beds over the next three to five years to its current 4,900 beds, to cash in on a growing affluent community in the region that wants better healthcare.

To date, it has spent about 75 per cent of the more than RM6 billion needed for those plans, Lim said.

It is looking for hospital opportunities in China, where it already has eight clinics based in Shanghai, Chengdu and Hong Kong.
"At the moment, we are entering into a contract to run two hospitals in Shanghai. We are also bidding for private hospitals that the government is tendering out in Hong Kong," he added.
The IPO, which raised RM6.3 billion, is the third biggest so far this year after social media group Facebook and oil palm operator Felda Global Ventures Holdings Bhd (FGV).

Private equity manager Abraaj Capital exited its investment in IHH through the IPO.

FGV, which was listed here last month, surged 18 per cent on its opening before closing at a 16 per cent premium over its offer price.