Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

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Mitra Keluarga Karyasehat Tbk / Equity Capital Markets

Mitra Keluarga (MK), recently released its pricing range of IDR14,500&ndash;18,000 per share, implying a EV/EBITDA multiple of 25-32x.We had earlier run the IPO through our framework at an assumed 22x EV/EBITDA, see <a href="../../../insights/mitra-keluarga-quality-play-but-all-hinges-on-pricing" target="_blank">here</a>&nbsp;for details. We have re-run our framework with the new pricing, and the company continues to score well on our framework, however, the price range appears aggressive in our view, given:<ul><li>Its local rival Siloam, is trading at 22x 2015 EV/EBITDA and 15x 2016 EV/EBITDA. While other regional rivals are trading between 18-23x 2015 EV/EBITDA range. MKs lower end of the range implies 25x 2015 EV/EBITDA and 21x 2016 EV/EBITDA. Thus, even at the lower end the deal is at 14% premium to Siloam on 2015 multiples and 37% premium on 2016 &nbsp;multiples. We do acknowledge that some investors will question Siloam's ability to deliver that kind of growth (for 2016), but the premium still look aggressive even compared to other regional peers.&nbsp;</li><li>At the high-end of the range, the deal will end up being the one of the most expensive healthcare stocks in the region, without the growth numbers to go along with the premium pricing. Thus, we see very limited upside, if any, at the high end.</li><li>Given the company's track record, and the long term potential of the sector, we believe long-only mangers will remain inclined to bid at the lower end, since the IPO offers a chance to get a size-able stake in a quality franchise.&nbsp;Thus, we would advice investors to bid at the lower end, wherein some reasonable upside of 10-15% might still be possible, depending on the book building.</li></ul>

Mitra Keluarga (MK), recently released its pricing range of IDR14,500&ndash;18,000 per share, implying a EV/EBITDA multiple of 25-32x.We had earlier run the IPO through our framework at an assumed 22x EV/EBITDA, see here&nbsp;for details. We have re-run our framework with the new pricing, and the company continues to score well on our framework, however, the price range appears aggressive in our view, given:Its local rival Siloam, is trading at 22x 2015 EV/EBITDA and 15x 2016 EV/EBITDA. While other regional rivals are trading between 18-23x 2015 EV/EBITDA range. MKs lower end of the range implies 25x 2015 EV/EBITDA and 21x 2016 EV/EBITDA. Thus, even at the lower end the deal is at 14% premium to Siloam on 2015 multiples and 37% premium on 2016 &nbsp;multiples. We do acknowledge that some investors will question Siloam's ability to deliver that kind of growth (for 2016), but the premium still look aggressive even compared to other regional peers.&nbsp;At the high-end of the range, the deal will end up being the one of the most expensive healthcare stocks in the region, without the growth numbers to go along with the premium pricing. Thus, we see very limited upside, if any, at the high end.Given the company's track record, and the long term potential of the sector, we believe long-only mangers will remain inclined to bid at the lower end, since the IPO offers a chance to get a size-able stake in a quality franchise.&nbsp;Thus, we would advice investors to bid at the lower end, wherein some reasonable upside of 10-15% might still be possible, depending on the book building.

Mitra Keluarga - Pricing leaves limited room for upside

PT Mitra Keluarga IPO has been one of the most anticipated IPO's so far this year, and will probably be one of the biggest IPOs for Indonesia investors this year.<blockquote>While firmed up pricing and offering details aren't available yet (tentative pricing on 5th Mar), we have been fielding quite a few questions from investors and hence, we ran the deal through our framework at a tentative pricing of 22x 2015 EV/EBITDA. We will provide further updates once more details are available.</blockquote>From our preliminary work, we would take the deal ~22x EV/EBITDA, given:<ul><li>The company is one of the largest operators of private hospitals in Indonesia, with one of the longest operating history and a good track record. The company is part of the Kalbe Group ( owners of Kalbe Farma).</li><li>Its local rival Siloam, plus regional rivals are trading in the 21-24x EV/EBITDA range.&nbsp;Thus, we feel investors should be comfortable at taking the deal around this range,&nbsp;although sources tell us that management is more keen on ~30x, which looks expensive, in our view.</li><li>The company is more profitable than recently listed rival Siloam, and hence, arguably deserves to trade at a certain premium, given its better run operations (Siloam's 2014 revenue is likely to be 72% higher than Mitra Keluarga, but EBITDA is likely to be 20% lower). Even though Siloam's growth plans are far more aggressive than Mitra Keluarga, however, we feel long-term investors will favour sustainable and profitable growth over rapid fire expansion.</li><li>Sector fundamentals are likely to remain supportive over the foreseeable future, with severe under penetration of medical services in Indonesia and consumer bias towards paying for quality care, both of which should continue to favour players with an established track record, like Mitra Keluarga.</li><li>Previous IPO's in the country have done well and investor interest in the name already seems to be strong. Should pricing be reasonable, we think the IPO has potential to generate ample demand and thus, deliver good post-IPO performance.</li></ul>

PT Mitra Keluarga IPO has been one of the most anticipated IPO's so far this year, and will probably be one of the biggest IPOs for Indonesia investors this year.While firmed up pricing and offering details aren't available yet (tentative pricing on 5th Mar), we have been fielding quite a few questions from investors and hence, we ran the deal through our framework at a tentative pricing of 22x 2015 EV/EBITDA. We will provide further updates once more details are available.From our preliminary work, we would take the deal ~22x EV/EBITDA, given:The company is one of the largest operators of private hospitals in Indonesia, with one of the longest operating history and a good track record. The company is part of the Kalbe Group ( owners of Kalbe Farma).Its local rival Siloam, plus regional rivals are trading in the 21-24x EV/EBITDA range.&nbsp;Thus, we feel investors should be comfortable at taking the deal around this range,&nbsp;although sources tell us that management is more keen on ~30x, which looks expensive, in our view.The company is more profitable than recently listed rival Siloam, and hence, arguably deserves to trade at a certain premium, given its better run operations (Siloam's 2014 revenue is likely to be 72% higher than Mitra Keluarga, but EBITDA is likely to be 20% lower). Even though Siloam's growth plans are far more aggressive than Mitra Keluarga, however, we feel long-term investors will favour sustainable and profitable growth over rapid fire expansion.Sector fundamentals are likely to remain supportive over the foreseeable future, with severe under penetration of medical services in Indonesia and consumer bias towards paying for quality care, both of which should continue to favour players with an established track record, like Mitra Keluarga.Previous IPO's in the country have done well and investor interest in the name already seems to be strong. Should pricing be reasonable, we think the IPO has potential to generate ample demand and thus, deliver good post-IPO performance.

Mitra Keluarga - Quality play but all hinges on pricing

Indonesia

Mitra Keluarga Karyasehat Tbk PT engages in hospital management and business services. The Company operates hospitals located in the Greater Jakarta Area, Surabaya and Tegal.

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Mitra Keluarga Karyasehat Tbk (MIKA IJ)

Mitra Keluarga - Pricing leaves limited room for upside

Mitra Keluarga (MK), recently released its pricing range of IDR14,500–18,000 per share, implying a EV/EBITDA multiple of 25-32x.We had earlier run...

Sumeet Singh

Mitra Keluarga - Quality play but all hinges on pricing

PT Mitra Keluarga IPO has been one of the most anticipated IPO's so far this year, and will probably be one of the biggest IPOs for Indonesia...

Sumeet Singh

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52-week Range

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