Malaysia’s IHH starts investor education for $2 billion IPO

IHH Healthcare (IHH) kicked off investor education yesterday for its initial public offering, which is targeting to raise about $2 billion, sources said. The Malaysia-based company, which operates hospitals in several markets including Malaysia, Singapore and Turkey, is seeking to list in Kuala Lumpur and Singapore. However, in Singapore it will initially only offer shares to retail investors, while the shares sold to institutional investors will all be listed in KL.

The expected deal size is based on a maximum price of M$2.85 ($0.90) that has been set for the shares offered to Bumiputera (or ethnic Malay) investors, one source said. Analysts at one syndicate bank estimate the equity value of the company at about $8 billion to $10.5 billion and sources say IHH is planning sell about 25%. About 80% of the offering will be new shares, while the remaining 20% will be secondary.

The roadshow is currently expected to start during the first week of July and the pricing will take place sometime during the following week, allowing for a listing in the week of July 23.

IHH starts its listing process as volatile market conditions have forced a number of IPOs in Hong Kong and Singapore to be either postponed or pulled in recent weeks, including the $1 billion IPO for Graff Diamonds that was cancelled the day before pricing due to insufficient demand. And Formula One, which was expected to kick off the management roadshow and institutional bookbuilding for an IPO of up to $3 billion this week decided to delay the launch due to the current poor market environment.

But Malaysia appears to be a rare bright spot. Felda Global Ventures, a palm oil, rubber and sugar plantation company, is currently on the road with an IPO of up to $3.2 billion. One source said yesterday that the deal is on track, and it is seeing strong demand from both domestic and international investors. Felda’s institutional order books will remain open until June 13 and the trading debut in Kuala Lumpur is scheduled for June 28.

If successful, IHH’s IPO will be the second-biggest in Malaysia this year after Felda’s planned offering.

Deals in Malaysia are doing fine because there is a lot of pension money to support the offerings, and given that IHH is majority-owned by government investment company Khazanah, investors can expect government pension funds to rally behind the deal, one source said. Another person said the defensive nature of the company’s business in healthcare is also an encouraging factor.

Sources noted that the cornerstone investor tranche for IHH will likely also be sizable, though they declined to elaborate at this time.

IFC, a member of the World Bank Group, has said that it is considering an investment in the healthcare company, but says on its website that “project cost and the amount and nature of IFC’s proposed investment cannot be disclosed at this time due to confidentiality and regulatory requirements”.

The investor education for IHH also comes as global markets have recouped some ground after recent sell-offs. FTSE Bursa Malaysia KLCI Index ended yesterday’s trade up 0.4%, bringing its gain so far this year to about 3%, as Asian stock markets reacted to a more than 2% gain in US stock markets on Wednesday.

In addition to its home markets of Singapore, Malaysia and Turkey, IHH is also expanding its presence in China, Hong Kong and India. It also says it has established operations and developments in Vietnam, Brunei and Macedonia, and will continue to explore opportunities in Asia, Central and Eastern Europe, the Middle East and North Africa.

Among these markets, the company says that Singapore and Turkey have become important hubs for medical travel in their respective regions, providing significant growth potential for its business.

In Singapore, the private healthcare provider owns and operates more than 60 medical centres and clinics, including the network of Parkway Shenton, which has a total registered patient pool of more than 450,000 and serves more than 2,000 corporate clients, according to its website.

IHH offers a wide spectrum of services across the healthcare sector — from general practitioner consulting and treatment of basic ailments to specialist consultancy, emergency and acute care and the most advanced and complex surgeries, according to the website.

Khazanah has a 62.1% stake in IHH and Japan’s Mitsui & Co owns 26.7%, while Middle East-based investment firm Abraaj Capital and the Aydinlar family own 7% and 4.2% in the company, respectively, according to a syndicate research report.

IHH’s revenue has been growing steadily and its profit before tax is expected to reach M$815 million this year from M$490 million last year, according to the report.

Bank of America Merrill Lynch, CIMB and Deutsche Bank are global coordinators, and Credit Suisse, DBS, and Goldman Sachs join them as bookrunners.