Sime Darby to explore other options for RSDH

PETALING JAYA: RHB Investment Bank Bhd says Sime Darby Bhd could continue to explore all options including an initial public offering (IPO) for its 50%-owned Ramsay Sime Darby Health Care Sdn Bhd (RSDH) following the termination of discussions with IHH Healthcare Bhd on the proposed sale of 100% of RSDH to the healthcare group.

Ramsay Health Care Ltd of Australia owns the remaining 50% stake in hospital operator RSDH.

“We gather the discussions failed mainly because IHH could not come to an agreement on the valuation and terms laid out by Sime Darby and Ramsay.

“While the outcome is disappointing, we understand Sime Darby is in no rush to sell RSDH, a non-core business,” RHB analyst Jim Lim Khai Xhiang wrote in a report yesterday.

On March 22, IHH proposed to acquire 100% of RSDH from Sime Darby and Ramsay for an enterprise value (EV) of RM5.67bil on a cash and debt-free basis.

The deal implied an EV to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio of 22 times, in line with recent healthcare transactions valued at between 20 times and 22 times.

“We estimated that Sime Darby could have received RM2.6bil from the divestment.

“We believe would have been used to pay a special dividend and reinvested in its core motor and industrial divisions, by acquiring adjacent and complementary assets,” he said.

RHB Investment made no change to its forecast on Sime Darby earnings but lowered its target price for Sime Darby shares to RM2.55 from RM2.75.

RHB Investment maintained its “buy” call on Sime Darby shares.

There had been news reports from some media outlets on Sime Darby’s planned IPO for RSDH although the proposal was put on hold as Sime Darby was looking at various opportunities to grow its healthcare business.

The termination of discussions with IHH generated investors’ and analysts’ anticipation that Sime Darby may revive its IPO plan for RSDH.

IHH’s share price closed up four sen higher at RM6.21 yesterday, while Sime Darby ended unchanged at RM2.23.