The listing of hospital operator IHH was among the biggest in a crop of jumbo IPOs in Malaysia’s traditionally quiet equity capital markets. It was also the first dual listing in Singapore and Malaysia, breaking new ground for regional cooperation.
Malaysia has been South-East Asia’s IPO capital of 2012, and it came as little surprise that the region’s first dual listing also originated there. IHH Healthcare raised M$6.3bn (US$2bn) from its dual IPO, selling 2.2bn shares simultaneously on Bursa Malaysia and Singapore Exchange. Investors could choose the tranche to buy into and received shares denominated in that currency.
The shares are fungible and can be exchanged for those on the other exchange in a process that takes one business day.
“We wanted the listing to represent the pan-Asian nature of our business. We also wanted to ensure that our previous investors came back to us,” said Ahmad Shahizam Mohd Shariff, head of business development and investor relations at IHH.
The simultaneous dual listing made sense for a company whose businesses spread across Malaysia, Singapore and Turkey. Furthermore, parts of the company’s healthcare businesses were previously listed on the SGX through Parkway Holdings, and on Bursa Malaysia through Pantai Holdings.
Ahmad Shahizam said that, while the dual listing was never a concern with investors, the complex nature of the company’s operations was. “Investors were more interested in understanding the fit of the newly acquired Turkish business. They also wanted the company to fill in the gap between the time some of the businesses were taken private and the current listing.”
The weak global stock markets, the novelty of the instrument and the timing of a major acquisition did not deter the company from launching the IPO in July.
There was certainly no shortage of investors. The deal drew 22 cornerstone investors, a record in South-East Asia. The institutional tranche was more than 130x covered at the top end of guidance. More than 400 accounts globally participated, although most received zero allocations.
The top 20 investors were allocated half of the institutional book and the top 10 accounts a third. The Malaysia public offering was subscribed 7x and the Singapore public offering 11x.
Something on the table
Despite the blowout book, the company took the unusual decision to leave something on the table for investors and priced the IPO at M$2.80 per share, near the top of the M$2.67–$2.85 guidance range. The Singapore offer was priced at S$1.13.
The strong response also came, despite criticism that the company had priced its IPO at an expensive 21x EV/Ebita, compared with an industry average of 16x.
“The premium is for the quality of our assets and the operating scale,” Ahmad Shahizam said.
However, going forward the premium shrinks, with IHH’s 2014 EV/Ebitda at 15x versus the industry average of 11x.
Despite the pricey IPO valuation, IHH remains the best-performing stock among the recently listed Malaysian companies.
Shares of IHH have risen 15% since listing, compared with a 9.6% rise for IGB REIT, a 3.3% gain for Felda Global Ventures and a surprise 7.6% second-day fall for Astro Malaysia.
Ahmad Shahizam said the shares had been actively traded on both SGX and Bursa Malaysia though the volume was slightly higher on the latter because of greater institutional participation from Malaysia. The bulk of the Singapore IPO went to retail investors, with institutional funds preferring the additional liquidity in Malaysia.
IHH does not rule out a third listing in Turkey, the country that now accounts for 39.8% of the company’s revenue, following the acquisition of an indirect 60% stake Turkey’s Acibadem Holdings for US$825.72m.
“It will not be a new listing, but an additional one. We may look at it in the future,” Ahmad Shahizam said. Singapore and Malaysia contribute 35.5% and 20.5% of revenue, respectively. Associate companies based in Turkey, China, India and Vietnam make up the remainder.
The company operates a network of 30 hospitals with 4,900 beds, and plans to add 3,300 beds between 2013 and 2015.
IHH has no immediate plans to raise equity because its net debt-to-operating profit ratio has fallen to 1.2x from 5.4x before the IPO. However, Ahmad Shahizam hinted that state investor Khazanah could reduce its stake in the company to 40% from the current 46.80%. “Over time, it [Khazanah] could monetize its holdings.”
The other major shareholder, Japan’s Mitsui, was unlikely to reduce its shareholding, he said.
Of the 2.2bn shares sold in the IPO, 1.8bn were new and the rest from Middle East private-equity fund Abraaj Capital. The Malaysian public offering comprised 208.5m shares, the Singapore one 140.6m shares, the institutional placement 498m shares and the cornerstone offering 1.38bn shares. Around 90% of the funds raised from the sale of the new shares will be used to repay loans.
IHH was incorporated in 2010 as a holding company for state-owned Khazanah Nasional’s healthcare investments in Parkway Holdings, Pantai Group, IMU Health and the Apollo Group.
Pantai Holdings was delisted in 2007 after Singapore’s Parkway Holdings acquired it. An IHH subsidiary made a general offer for Parkway in 2010 and delisted it. IHH now conducts its operations through subsidiaries Parkway Pantai, Acibadem and IMU Health.
Bank of America Merrill Lynch, CIMB and Deutsche Bank were joint lead co-ordinators, while Credit Suisse, DBS and Goldman Sachs were joint bookrunners for the global institutional tranche and cornerstone offering.
CIMB and Maybank were joint bookrunners for the Bumiputera tranche and joint underwriters for the Malaysian public offering. Nomura, OCBC, RHB and UBS were co-lead managers.
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