IHH shows commitment towards Fortis stake purchase

KUALA LUMPUR: Kenanga Research views IHH Healthcare Bhd's latest bid offer for Fortis Healthcare Ltd as the same as previous offer, although it views the move as higlighting the medical service provider's commitment towards securing the stake.

"Essentially in terms of total consideration, the revised proposal is the same as the previous offer i.e. to infuse up to INR4,000 crores into Fortis through a preferential allotment of equity shares at a revised price of INR175/share or 9% higher than its previous bid of
INR160/share," it said in a Thursday report.

With this recent bid, IHH is now the highest bidder for Fortis, followed by Munjal-Burmans, KKR-backed Radiant Life Care and Manipal-TPG.

Kenanga Research said it is unsure of the exact stake IHH is hoping to acquire but based at INR175 a share the valuations are lofty at 76x price earnings at FY19E consensus net profit of RM70.5mil.

"The proposed acquisition of Fortis is expected to be earnings dilutive in the short to medium term but should gradually be earnings accretive once operations ramp up."

The research house maintained underperform on IHH with a sum-of-parts target price of RM4.90.

"The stock is currently trading at PERs of 62x on FY18E and 54x on FY19E, which appear rich as compared to its average net profit growth prospects of 10% p.a."