Wednesday, June 20, 2012
Healthcare sector/Raffles Medical Grp
Healthcare sector/Raffles Medical Grp: DMG has sector report and Overweights sector. House note possible boost for the sector. The upcoming IPO could result in greater interest in SG’s Healthcare sector, and could possibly lend a slight boost to the share prices of the other SGX-listed healthcare providers. Assuming IHH raises RM6.4b, this works out to be RM2.86 / share. At an exchange rate of S$1=RM2.430, this translates to a price of $1.18 / share or a P/E of 35x based on FY12 annualized EPS. Other regional healthcare peers (excluding Fortis Healthcare) are trading at an average P/E of 23.8x. Raffles Medical (BUY\TP: $2.67) (its closest SGX-listed peer) is trading at 22.9x P/E. Nonetheless, note that IHH is a large healthcare provider with about 4,900 beds, and significant global operations that span across Singapore, Malaysia, India and Turkey and would be in a good position to benefit from Asia’s growing medical tourism. Regional peers’ do not have significant overseas operations. Most of Raffles Medical’s shareholders are institutions, with stakes less than 5%. Given Raffles Medical’s consistent and stable growth, unlikely that these shareholders would reduce stakes just to free up funds to invest in another healthcare group. Even if that happens, house do not think there would be significant impact on Raffles Medical’s share price. In fact, with spotlight on SG’s private hospitals, IHH’s IPO might help raise Raffles Medical’s brand awareness overseas.