Healthcare Sector: Back in the limelight?

The IPOs of Khazanah’s Healthcare Holdings and Fortis Healthcare’s business trust should bring a lift to the ailing sector, says OCBC.

According to OCBC Investment Research team, during the recently concluded 4QCY11 results period, Raffles Medical Group reported results which were in line with their expectations, while Biosensors International Group’s (BIG) core earnings came in slightly below their estimates.

Nevertheless, both healthcare companies continued to showcase healthy growth trends. OCBC notes that during 2010, the Healthcare sector created substantial investor fervor after the privatisation of Parkway Holdings and Thomson Medical Centre at rich valuations.

"Both companies continued to showcase healthy growth trends, although BIG’s financials were boosted by the
consolidation of JW Medical Systems. For RMG, we also like its high earnings quality and opine that it is sustainable, backed by its strong operating cashflow generating ability and robust industry fundamentals," it said.

Looking ahead, OCBC believes that the Healthcare sector could return to the limelight again should the high-profile IPOs of Khazanah’s Integrated Healthcare Holdings and Fortis Healthcare’s business trust materialise.

Media reports have recently highlighted Fortis Healthcare’s plans to list a US$400m business trust on SGX in 2Q12, following its decision to postpone the IPO of Religare Healthcare Trust last year due to unfavourable market conditions1.

Another anticipated IPO could come from Khazanah Nasional’s listing of Integrated Healthcare Holdings (IHH) in 2H12, with a dual listing in Singapore and Malaysia a possibility.

"This could potentially raise proceeds of US$3b1.As a recap, Parkway Holdings (now part of IHH) was privatised in 2010 at ~37x trailing PER (based on EPS before exceptional items). Should this IPO materialise at similar, if not higher valuations, it might provide an impetus for a re-rating of the sector," OCBC said.

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