IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p>On 6 May 2021, Bloomberg reported that <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a>, the largest shareholder with a 32.90% stake, is currently exploring a proposal to privatise <a href="https://www.smartkarma.com/entities/ihh-healthcare-bhd" target="_blank" data-smartkarma-citation="entities:876:1" rel="noopener">IHH Healthcare (IHH MK)</a>. Mitsui is aiming to partner with private equity firms and has reached out to Khazanah Nasional Berhad, the second-largest shareholder with a 26.02% stake, to acquire its stake, according to Bloomberg. Mitsui and IHH have not formally commented on the report. On the back of the report, the shares have risen 8.8% from the unaffected price of RM5.20 (5 May) to the last close price of RM5.66. </p><p>IHH is listed on the Main Markets of Bursa Malaysia and the Singapore Stock Exchange. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. Mitsui sits just below the threshold and the acquisition of further shares from Khazanah Nasional Berhad would trigger an MGO. </p><div class="content-highlight"><p>We think that report has some credibility due to Mitsui’s view that IHH is a core asset to fulfil its ambition of expanding in the largest healthcare ecosystem in Asia. Also, Mitsui has a previous working relationship with Khazanah Nasional Berhad and announced the acquisition of a 16% stake in IHH from Khazanah Nasional Berhad in November 2018. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal). </p></div>

On 6 May 2021, Bloomberg reported that Mitsui &amp; Co Ltd (8031 JP), the largest shareholder with a 32.90% stake, is currently exploring a proposal to privatise IHH Healthcare (IHH MK). Mitsui is aiming to partner with private equity firms and has reached out to Khazanah Nasional Berhad, the second-largest shareholder with a 26.02% stake, to acquire its stake, according to Bloomberg. Mitsui and IHH have not formally commented on the report. On the back of the report, the shares have risen 8.8% from the unaffected price of RM5.20 (5 May) to the last close price of RM5.66. IHH is listed on the Main Markets of Bursa Malaysia and the Singapore Stock Exchange. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. Mitsui sits just below the threshold and the acquisition of further shares from Khazanah Nasional Berhad would trigger an MGO. We think that report has some credibility due to Mitsui’s view that IHH is a core asset to fulfil its ambition of expanding in the largest healthcare ecosystem in Asia. Also, Mitsui has a previous working relationship with Khazanah Nasional Berhad and announced the acquisition of a 16% stake in IHH from Khazanah Nasional Berhad in November 2018. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal). 

IHH Healthcare’s Possible Privatisation by Mitsui

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Bottom-Up

<p>Johor Corp, <a href="https://www.smartkarma.com/entities/kpj-healthcare-berhad" target="_blank" data-smartkarma-citation="entities:877:1" rel="noopener">KPJ Healthcare (KPJ MK)</a> 's controlling shareholder, is taking concrete steps to increase the returns on its investment in the company. First, there are a new board of directors and CEO who are placing more emphasis on capital efficiency. Second, Bloomberg reports that Johor Corp is evaluating strategic options, most likely in the form of a minority investment or other transaction that would preserve its controlling stake, as opposed to an outright sale. Either way, the increased focus on returns should drive a re-rating of the shares' EV/EBITDA multiple from 10-12x currently to ~15x.</p>

Johor Corp, KPJ Healthcare (KPJ MK) 's controlling shareholder, is taking concrete steps to increase the returns on its investment in the company. First, there are a new board of directors and CEO who are placing more emphasis on capital efficiency. Second, Bloomberg reports that Johor Corp is evaluating strategic options, most likely in the form of a minority investment or other transaction that would preserve its controlling stake, as opposed to an outright sale. Either way, the increased focus on returns should drive a re-rating of the shares' EV/EBITDA multiple from 10-12x currently to ~15x.

KPJ Healthcare: Re-Energizing the Share Price

<p>We had been bearish on the stock for several years because of 1) deceleration in growth, 2) planned significant capacity increases in Singapore, and 3) the launches of two hospitals in China. Now that the market has baked in slower growth in the core business and start-up losses in China should stabilize this year and decline in future years, we think the shares are worth a second look. Further, the lack of a clear succession plan for the Founder/Executive Chairman suggests that we have a path to an exit.</p>

We had been bearish on the stock for several years because of 1) deceleration in growth, 2) planned significant capacity increases in Singapore, and 3) the launches of two hospitals in China. Now that the market has baked in slower growth in the core business and start-up losses in China should stabilize this year and decline in future years, we think the shares are worth a second look. Further, the lack of a clear succession plan for the Founder/Executive Chairman suggests that we have a path to an exit.

Raffles Medical Group: A Path to the Exit

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Credit

<p>One good news since we last wrote about Parkway Pantai ( <a href="https://www.smartkarma.com/entities/parkway-pantai-ltd" target="_blank" data-smartkarma-citation="entities:29218:1" rel="noopener">Parkway Pantai Ltd (0794727D SP)</a>) this July ( <a href="https://www.smartkarma.com/insights/parkway-pantai-good-brand-with-limited-upside" target="_blank" data-smartkarma-citation="insights:41759" rel="noopener">Parkway Pantai: Good Brand with Limited Upside</a> ) is that the first COVID19 vaccine by <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a>  has been rolled out at the time of this writing and several potential candidates in the final phases of testing are also waiting to be approved for mass production. Although we have seen spikes of new mutated COVID19 cases in the UK and South Africa, Pfizer  believes the efficacy of its vaccine should still be more than 90% effective against the more contagious variation. The company’s claim that it could come up with a new effective vaccine for this variation in 6 weeks lends comfort to investors that there is light at the end of the tunnel.</p>
<p>Parkway Pantai’s hospital operations have in fact been less affected than what we had originally expected. Its key Singapore and Malaysian markets have seen occupancy rebounding to above 50% in 3Q20. However, Indonesia, its biggest market for its Singapore operation, is still closed due to COVID19 as the country is still struggling to control the outbreak there. Malaysia has also seen a resurgent of COVID19 cases after 3Q but management is confident that the impact will not be as bad as in 2Q.</p>
<p>PARKPT 4.25% 7/22c traded at an attractive YTM of 5.58% at the time of writing compared to other local Healthcare bonds. We believe the perpetual will likely be called on 27 July 2022 as global interest rates will stay low at least in the short and medium tenor, in our opinion, as mass vaccination to countries worldwide is a “Herculean” task that requires massive logistical co-ordination for the worldwide vaccine distribution and production. Normalcy may not return to the world till the end of 2022, in our view, when everyone gets vaccinated. As for Parkway Pantai, based on its clientele profile which is mainly the higher income group, getting themselves first to be vaccinated should not be a problem as long as they are willing to pay, in our opinion.</p>
<p>As a “BB” credit, in our view, PARKPT 4.25% Perp (7/22c)’s fair YTC should be c.4.0% versus its current YTC of 5.58%, showing a near-term upside of 158bp, at time of writing. With vaccination on the horizon, we see normalcy returning towards the end of 2021 and see asymmetric upside for the bonds on improving operational performance and value proposition versus peers. As such, we revise our recommendation on the bonds from NEUTRAL to OVERWEIGHT.</p>

One good news since we last wrote about Parkway Pantai ( Parkway Pantai Ltd (0794727D SP)) this July ( Parkway Pantai: Good Brand with Limited Upside ) is that the first COVID19 vaccine by Pfizer Inc (PFE US)  has been rolled out at the time of this writing and several potential candidates in the final phases of testing are also waiting to be approved for mass production. Although we have seen spikes of new mutated COVID19 cases in the UK and South Africa, Pfizer  believes the efficacy of its vaccine should still be more than 90% effective against the more contagious variation. The company’s claim that it could come up with a new effective vaccine for this variation in 6 weeks lends comfort to investors that there is light at the end of the tunnel.
Parkway Pantai’s hospital operations have in fact been less affected than what we had originally expected. Its key Singapore and Malaysian markets have seen occupancy rebounding to above 50% in 3Q20. However, Indonesia, its biggest market for its Singapore operation, is still closed due to COVID19 as the country is still struggling to control the outbreak there. Malaysia has also seen a resurgent of COVID19 cases after 3Q but management is confident that the impact will not be as bad as in 2Q.
PARKPT 4.25% 7/22c traded at an attractive YTM of 5.58% at the time of writing compared to other local Healthcare bonds. We believe the perpetual will likely be called on 27 July 2022 as global interest rates will stay low at least in the short and medium tenor, in our opinion, as mass vaccination to countries worldwide is a “Herculean” task that requires massive logistical co-ordination for the worldwide vaccine distribution and production. Normalcy may not return to the world till the end of 2022, in our view, when everyone gets vaccinated. As for Parkway Pantai, based on its clientele profile which is mainly the higher income group, getting themselves first to be vaccinated should not be a problem as long as they are willing to pay, in our opinion.
As a “BB” credit, in our view, PARKPT 4.25% Perp (7/22c)’s fair YTC should be c.4.0% versus its current YTC of 5.58%, showing a near-term upside of 158bp, at time of writing. With vaccination on the horizon, we see normalcy returning towards the end of 2021 and see asymmetric upside for the bonds on improving operational performance and value proposition versus peers. As such, we revise our recommendation on the bonds from NEUTRAL to OVERWEIGHT.

Parkway Pantai: Attraction from Vaccination

Equity Capital Markets

Hygeia Healthcare / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/hygeia-healthcare-group" target="_blank" data-smartkarma-citation="entities:28875:1" rel="noopener">Hygeia Healthcare Group (6078 HK)</a> is the largest oncology healthcare group in China as measured by the revenue generated from radiotherapy-related services in 2019, according to Frost &amp; Sullivan. Hygeia will commence trading on Monday, 29 June. Hygeia priced its IPO at HK$18.50, at the top-end of the indicative price range of HK$17.00-18.50 per share. Hygeia raised net proceeds of HK$2,072 million ($267 million).</p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/hygeia-healthcare-ipo-initiation-on-call" target="_blank" rel="noopener">our initiation note</a>, we stated that Hygeia is a play on China’s oncology healthcare service market which is influenced by structural trends such as increasing market share of radiotherapy, the rise of private hospitals and the growing popularity of multi-discipline treatments. In light of Hygeia's attractive fundamentals (solid organic growth, margin progression and cash generation), we think that the IPO price still offers some upside potential. </p></div></div></div>

Hygeia Healthcare Group (6078 HK) is the largest oncology healthcare group in China as measured by the revenue generated from radiotherapy-related services in 2019, according to Frost &amp; Sullivan. Hygeia will commence trading on Monday, 29 June. Hygeia priced its IPO at HK$18.50, at the top-end of the indicative price range of HK$17.00-18.50 per share. Hygeia raised net proceeds of HK$2,072 million ($267 million).In our initiation note, we stated that Hygeia is a play on China’s oncology healthcare service market which is influenced by structural trends such as increasing market share of radiotherapy, the rise of private hospitals and the growing popularity of multi-discipline treatments. In light of Hygeia's attractive fundamentals (solid organic growth, margin progression and cash generation), we think that the IPO price still offers some upside potential. 

Malaysia

KPJ Healthcare Berhad is an investment holding company. Through its subsidiaries, the Company operates specialist medical centers and also provides pathology and laboratory services, hospital management services, drug and medical distribution along with operating a nursing college.

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KPJ Healthcare (KPJ MK)

IHH Healthcare’s Possible Privatisation by Mitsui

Mitsui, the largest shareholder, is currently exploring a proposal to privatise IHH. Overall, at the last close price, the downside risk is low...

Arun George

Raffles Medical Group: A Path to the Exit

We were bearish for several years because of slowing growth and expected drags from new facilities. We are turning bullish now that the market...

Kemp Dolliver, CFA

Parkway Pantai: Attraction from Vaccination

Attractive valuation in expectation of a call in July 2022 and vaccination effects on the hospital visits across the border from Indonesia

Bondcritic

Hygeia Healthcare IPO: Trading Debut

Hygeia Healthcare Group (6078 HK) is the largest oncology healthcare group in China as measured by the revenue generated from radiotherapy-related...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

IHH Healthcare’s Possible Privatisation by Mitsui

Mitsui, the largest shareholder, is currently exploring a proposal to privatise IHH. Overall, at the last close price, the downside risk is low...

Arun George

KPJ Healthcare: Re-Energizing the Share Price

KPJ Healthcare's controlling shareholder is taking steps to drive a re-rating by placing more emphasis on capital efficiency and evaluating some...

Kemp Dolliver, CFA

Raffles Medical Group: A Path to the Exit

We were bearish for several years because of slowing growth and expected drags from new facilities. We are turning bullish now that the market...

Kemp Dolliver, CFA

Parkway Pantai: Attraction from Vaccination

Attractive valuation in expectation of a call in July 2022 and vaccination effects on the hospital visits across the border from Indonesia

Bondcritic

Hygeia Healthcare IPO: Trading Debut

Hygeia Healthcare Group (6078 HK) is the largest oncology healthcare group in China as measured by the revenue generated from radiotherapy-related...

Arun George