Malaysia's IHH eyes Thai hospital operator

PETALING JAYA: IHH HEALTHCARE BHD is believed to be looking at acquiring an 11.5% associate stake in Bangkok Dusit Medical Services Pcl (BDMS), the largest hospital operator listed on the Stock Exchange of Thailand, to gain a foothold in Thailand, sources said.

It is understood that the acquisition could be funded by a combination of cash and issuance of new shares.

The 11.5% stake in BDMS has a market value of 30.64 billion baht (RM3.27bil) based on the last closing price of the company’s shares at 17.20 baht.

IHH has a market capitalisation of RM39.26bil on Bursa Malaysia while it is valued at S$15bil (RM39.72bil) on the Singapore stock exchange.

The acquistion will be funded internally and externally, the quantum of which will be determined later by the company.

“IHH has been wanting to gain an entry into Thailand and this move would give it an instantaneous exposure to the country. Acquisition of an entire stake can take longer and will be more tedious in regulatory terms,” the source said.

“The IHH brand name is well recognised, especially since its successful IPO (initial public offering), and this acquisition will help it solidify its presence in Asia,” he added.

Analysts said that the acquisition made sense as the baht had been strenghtening in the past year against the ringgit and Singapore dollar.

“The healthcare sector excels on both fronts of being defensive in nature as earnings are backed by a growing exposure to insurance-based clients, and they can be viewed as growth companies as well,” said MIDF Research healthcare analyst Ahmad Annuar Rahman.

The purchase of the Thai asset could be a catalyst for the stock moving forward, he added.

The acquisition into BDMS will be the second associate stake buy for IHH after its 10.85% interest in India-based Apollo Hospital Enterprise Ltd.

At present share prices, BDMS is valued at a forecast FY14 ended Dec 31 price/earnings ratio of 36.52 times and price-to-book ratio of 5.82 times, according to Bloomberg data.

IHH was last traded at a forecast FY14 ended Dec 31 price/earnings ratio of 51.06 times and a price-to-book ratio of 2.07 times.

BDMS operates six major hospital groups in Thailand – Bangkok Hospitals, Samitivej Hospitals, BNH Hospital Phyathai Hospital, Paolo Memorial Hospital and the Royal Hospitals with a total of 29 hospitals – and two in Cambodia with a bed count of almost 5,000.

A presence in BDMS would also ease targeting of medical tourism dollars from the north Asean region for IHH indirectly, given the bigger similarity of country cultures of Cambodia, Laos, Myanmar and Vietnam to Thailand.


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