GK Goh

GK Goh: to lift halt at 8.30am this morning. Proposed to acquire a 47.6% in Domain Principal Group (DPG), a leading Australian provider of residential aged care services for A$136.7m, from two trusts managed by AMP Capital, which values DPG at 9.1x FYJun13 EV/EBITDA, and 22.5x P/E. The transaction is subject to certain conditions precedent, including approval of sh/h, and of Australia’s Invmt Review Board. Upon completion, GK Goh and AMP Life will have equal 47.6% stakes in DPG, with DPG mgt owning the balance. GK Goh and AMP Life have each committed to invest a further A$25m ($29.1m) when needed to finance further invmt in Australia’s aged care sector. GK Goh will fund this purchase with a combination of existing liquid assets and bank debt. On a pro forma basis, GK Goh’s gearing would be ~31% following the transaction. The invmt is expected to be earnings accretive and to generate div income for GK Goh in future. DPG is one of the largest providers of residential aged care services in Australia, with 55 facilities totaling more than 4,500 bed spaces in the states of New South Wales, Queensland, Victoria and Western Australia. Australia’s aged care market is highly fragmented, with 1,054 providers operating 2,716 residences with over 182,000 aged care beds. The top five providers, including DPG, have a combined 15% market share. There are considerable opportunities for consolidation and new investments, with Australia’s ageing population driving an anticipated 40% sector growth over the next decade. DPG has been operating with occupancy rates of over 90% and the business is already performing strongly. GK Goh believes that there is significant scope for further growth through the upgrading of existing assets; greenfield investment into new facilities; mergers and acquisitions; and operating efficiencies that will result from increasing scale. GK Goh trades at 13.1x P/E, 0.7x P/B.