IHH Healthcare

IHH Healthcare: Unofficial reports by Malaysia-based The Star suggesting that IHH Heathcare is looking to acquire an 11.5% stake in Thai hospital operator BGH has been refuted by the group, declaring that it has no plans to pursue the acquisition at this point. BGH is the largest hospital operator in Thailand with 35 hospitals. It also runs two hospitals in Cambodia. In the event of an acquisition, IHH is expected to use cash and new shares to fund its purported RM3.3b acquisition. With its cash hoard of RM2.2b and negligible gearing, IHH should have no problems financing the acquisition. More importantly, IHH would be able to profit from BGH’s dominance in Thailand and strong exposure to north ASEAN. BGH plans to acquire six more hospitals this year. Trading at 43x fully-diluted P/E versus the 30x valuation for BGH, a potential acquisition should be earnings accretive. Overall, Maybank-KE maintains a Hold rating on IHH with TP of RM4.82 (S$1.81) pending further details and catalysts. Valuation at 42.9x FY15E P/E is relatively steep versus peer average of 30.4x.