Breathtaking numbers from IHH
IHH Healthcare Berhad, the second largest private hospital group in the world, has raised 6.3bn ringgit ($2bn) through an IPO in Malaysia and Singapore. The deal values 2012 prospective net profits at 21 times and values the group at 23bn ringgit ($7.3bn). So what are the lessons from this?
According to Bloomberg, the deal was oversubscribed 100 times by institutional investors. IHH is number 1 in Turkey through Acibadem, Singapore with a marketshare of 44% with Parkway and number two in Malaysia with a 15% share. it plans to now grow in India, where it has an 11% stake in Apollo as well as a single hospital, and in China (six hospitals in Shanghai and one in Hong Kong). Bed numbers shoud soar from 4,900 to 8,230 in five years.
In other words the group is valued at around three times as much (or more) as the big European hospital groups like Rhoen or Generale de Sante. That reflects growth prospects in developing countries. The difference also reflects the fact that big mainland European hospital groups rely on public payors for almost all their custom and the outlook for tariff rises is bleak.
A more interesting comparison is with Ramsay ion around 16 times 2012 earnings. That reflects a decade of success but it is worth noting that Ramsay is hugely dependent on state payors in Australia, France and the UK.
We think IHH is far too expensive. OK, it has strong positions in Turkey, Malaysia and Singapore, but much of the hype comes from its hopes to open up China and India – markets where its presence is negligible and where newcomers face many barriers. The next five years will see an explosion of private bed capacity in these countries and acquisition prices are unlikely to fall fast.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
