Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study


Tuesday, July 24, 2012

IHH Healthcare poised for rapid growth

PETALING JAYA: The “rich” valuation for IHH Healthcare Bhd is justified as the healthcare provider group has strong earnings and market growth prospects over the next five years, according to managing director Dr Lim Cheok Peng. Lim reiterated that in the pipeline were more than 3,300 new beds to be delivered and 17 hospital developments, which would be completed by end-2016.

Known as Asia's biggest hospital operator, IHH presently operates over 4,900 beds in 30 hospitals as well as clinics and ancillary healthcare business across eight countries. “As we continue this journey, how will IHH look like in another three to five years? It will be a 47-hospital group with more than 8,000 beds,” Lim told StarBiz in a telephone interview.

He highlighted that this would obviously result in a significant impact on the group's annual revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) by end-2016. For the financial year ended Dec 31, 2011 (FY11), the group posted a pro-forma revenue of RM5.2bil and EBITDA of RM1.03bil. Its net profit was RM132mil. IHH is en-route to a dual listing on the Main Market of Bursa Malaysia and the Main Board of Singapore Exchange Securities (SGX) tomorrow.

The group's US$2bil (RM6.3bil) initial public offering at RM2.80 per share will be the third largest IPO in the world this year after Facebook Inc and Felda Global Ventures Holdings Bhd.

In a recent report, JF Apex Securities said its fair value for IHH was RM3.00 per share, based on 20 times FY13 enterprise value (EV) over EBITDA or an implied 55% premium to the average FY13 EV/EBITDA of its regional peers of 13 times, in view of IHH being the world's second largest healthcare company and its relatively larger market capitalisation. Meanwhile, ECM Libra has a hold call on IHH's stock and target price of RM2.94 per share, based on sum-of-parts valuation.

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