Books opened on Friday for Mitra Keluarga Karyasehat's IPO, which could net the Indonesian hospital operator up to Rp4.71 trillion ($369 million).
If successful, the IPO will be the country's first this year, and the largest ECM transaction to date.
On offer are some 261.9 million shares - or 18% of the enlarged share capital - at an indicative price range of Rp14,500 to Rp18,000 per unit, according to a term sheet seen by FinanceAsia.
Depending on where the shares price, the group could net between IDR3.8 trillion and Rp4.71 trillion.
Some 28% of the 261.9 million shares are primary, while the remainder are secondary. The selling shareholder, Lion Investment Partners, aims to reduce its stake from 66% to 49.7%, according to a person close to the deal.
It was too early on Friday to gauge how much anchor demand the syndicate had lined up, although sources say the company is resonating well with investors, perhaps partially due to its valuation compared to its peers.
Mitra is being marketed at an estimated 2015 p/e ratio of 24.4 to 30.7 times on a consensus basis, the source told FinanceAsia.
"Some of the company's comps have paunchy valuations for good reasons but [Mitra's] assets are better," a second source told FinanceAsia. "They are driven by their medical practice. And we already have good traction."
Investors considering the hospital operator should view the company - which owns 12 hospitals in Indonesia - as a derivative play on consumers, the second source said.
“If you look at the domestic consumer story in Asia generally and Southeast Asia in particular, [investors] are trying to position themselves on where the middle class will spend their income,” the second source said.
“When a country gets to the magic number - around $3,000 GDP per capita - people will start spending their money on other things besides food and rent,” the source added.
Given the limited insurance offered in Indonesia, people have to pay for healthcare out of their own pocket, which makes it more of a consumer play, the second source noted.
Mitra is planning on using the proceeds from the primary share sale to establish new hospitals, purchase medical equipment and boost its IT infrastructure, acquire more land and expand existing hospitals.
Company executives have said in media reports the group intends to open seven new hospitals in Greater Jakarta and in Surabaya in the next five years.
Where are the comps trading?
At 24.4 to 30.7 times 2015 p/e, Mitra's marketed valuation is lower than four out of five of other Southeast Asian and Australian hospital operators.
Notably, it is significantly lower than its closet comp, Siloam Hospitals, the largest private-sector hospital operator in Indonesia in terms of number of beds, is trading at 203.37 times 2014 p/e. Shares are down 11% so far this year up to February 26.
Siloam's valuation was considered high at the time of its 2013 IPO (19.8 to 27.4 times), although the valuation took into account the fact that it planned to open four new hospitals before the end of 2014.
Another comp, Malaysian company IHH Healthcare, is currently trading at 46.92 times its 2015 p/e and is up 14% year-to-date.
Mitra is more of a domestic play than IHH, which operates hospitals in Malaysia, Singapore and Turkey, although still considered a peer since the dynamics in the markets are similar - rising affluence, growing middle class and ageing populations spending more on healthcare.
Healthscope, the Australian hospital operator that raised A$2.25 billion ($2.1 billion) in its flotation last July, is trading at 2015 p/e of 30.36 times and the shares are up 8% year-to-date, according to Bloomberg.
Other comps include Thailand's Bangkok Chain Hospital, trading at 31.73 times 2015 p/e, and Singapore's Raffles Medical Group, trading at 29.10 times.
UBS, Morgan Stanley and Kresna are joint bookrunners, while Deutsche Bank is also working on the deal.
So far, four issuers have raised $531 million in the country via placements, according to Dealogic data. PT Matahari Department Store secured $295 million in a follow-on on January 23.
