KUALA LUMPUR |
KUALA LUMPUR (Reuters) – Malaysia launched on Tuesday the $2 billion initial public offering of state-backed hospital operator IHH Healthcare Bhd, marking the third biggest listing of the year globally and cementing its status as Asia’s top IPO destination for 2012.
The sale of shares in IHH follows the $3 billion listing on the Malaysian bourse last week of palm oil firm Felda Global Ventures Holding (FGVH.KL), which was the world’s biggest IPO of the year after Facebook Inc (FB.O).
The IHH IPO prospectus was launched at an event in Kuala Lumpur, continuing Prime Minister Najib Razak’s drive to monetize state-linked assets and boost the economic feel-good factor ahead of a general election due by next March.
CIMB Group Chief Executive Nazir Razak, brother of the prime minister and head of the investment bank that is lead global co-ordinator of the listing, said IHH’s market value of 22.9 billion ringgit ($7.24 billion) based on an indicative IPO price of 2.85 ringgit per share would place it second to HCA Holdings (HCA.N) – the world’s largest listed healthcare provider.
“Malaysia looks set to be Asia’s top IPO market this year, a testament to both the quality of companies being listed and the resilience of the Malaysian equity market,” Nazir told reporters.
IPOs in Malaysia, where the equity market is dominated by local investors and a large domestic pension fund system, have defied a trend in financial markets such as Singapore, where motor racing firm Formula One decided to postpone its near $3 billion flotation.
As a result, Kuala Lumpur has been running neck-and-neck with China’s Shenzhen as Asia’s top IPO destination.
Sovereign wealth fund the Kuwait Investment Authority, asset manager Blackrock and 20 other big “cornerstone” investors have committed to buy nearly two-thirds of the shares on offer.
But some investors warned Malaysia’s top dog IPO status was unlikely to last long.
“Malaysia is now the largest IPO market in Asia and surely that is not sustainable,” said Abdul Jalil Abdul Rasheed, chief executive officer of Aberdeen Islamic Asset Management Sdn in Kuala Lumpur.
“I think it’s just that Malaysia is probably having some time in the sun now that other markets are quite weak.”
SECTOR PLAY
IHH, the healthcare arm of Malaysia’s state investor Khazanah Nasional, is one of the few available plays on the healthcare sector in the region, where rising incomes are stimulating demand for better services.
With its dual listing in Singapore, IHH joins the likes of Kuala Lumpur-listed KPJ Healthcare Bhd (KPJH.KL), Singapore’s Raffles Medical Group (RAFG.SI), Bangkok Dusit Medical Services BGH.BK and India’s Fortis Healthcare (FOHE.NS).
IHH, which counts Japan’s Mitsui Co (8031.T) and Dubai-based Albraaj Capital as shareholders along with Khazanah, embarked on an aggressive overseas shopping spree in recent years.
It added Turkish hospital group Acibadem AS (ACIBD.IS), Singapore’s Parkway Holdings and India’s Apollo Hospitals Enterprise Ltd (APLH.NS) to its local holdings Pantai Hospitals and International Medical University.
Khazanah Managing Director Azman Mokhtar said the listing would value its stake in IHH at 11 billion ringgit, an 83 percent jump from its equivalent investment cost of some 6 billion ringgit.
“The listing will help to underpin the various governments’ sectoral and economic ambitions,” said Azman in an earlier speech to investors at the launch.
“This includes healthcare as one of the key sectors in Malaysia, promotion of Singapore as a regional and global healthcare hub and Turkey and India as significant and vibrant domestic and medical tourism destinations.”
IHH has made no mention of plans to use the IPO proceeds for further acquisitions. It said in its draft Singapore prospectus it would use 4.66 billion ringgit ($1.5 billion) to pay down debt, saving some 120 million ringgit ($37.8 million) in interest payments.
Total debt stood at around $2.4 billion as of the end of March.
BETTER THAN FELDA GLOBAL
A strong domestic market could see IHH make a stronger trading debut than Felda Global’s 20 percent first day pop when the firm lists on July 25, due in part to its defensive appeal, local investors say.
“IHH offers less to the public and institutional investors (10.52 percent) than Felda (26.9 percent), how difficult is it for it to perform the same as Felda?” said a senior official with a Malaysian bank-backed fund management firm.
The institutional price and final retail price is expected to be fixed on July 12.
The 22 cornerstone investors, who also include International Finance Corp, the private investment arm of the World Bank, will buy 1.39 billion of the 2.23 billion shares on offer – just over a quarter of the company – the biggest take-up by such investors of any recent major offering in the region.
Up to 1.8 billion new shares in the IPO are on offer, while Abraaj Capital will sell 434.7 million shares in the dual Kuala Lumpur and Singapore listing, the draft prospectus showed.
The group posted a profit of 394.117 million ringgit in 2011 versus 574.754 million in 2010 – a drop of 31 percent on higher staff costs.
CIMB (CIMB.KL), Deutsche Bank (DBKGn.DE) and Bank of America-Merrill Lynch (BAC.N) are the lead global co-ordinators, with Credit Suisse (MLPN.P), DBS (DBSM.SI), Goldman Sachs (GS.N) and Maybank (MBBM.KL) acting as joint bookrunners in the IPO. ($1 = 1.2668 Singapore dollars) ($1 = 3.1615 Malaysian ringgit)
(Additional Reporting by Saeed Azhar in Singapore; Editing by Niluksi Koswanage and Alex Richardson)