PP16832/01/2013 (031128) PP16832/01/2012 (029059)
Malaysia
Initiating Coverage 16 October 2012 17 October 2011
Hold (new) IHH Healthcare A Cut Above the Rest Share price: MYR3.20 Target price: MYR3.15 (new) A leader in premium healthcare. IHH is one of the largest listed private healthcare providers in the world. Its healthcare business comprises a global network of 4,900 licensed beds in 30 hospitals. In
James KOH addition to holding leading positions in three key markets – Singapore, jameskoh@maybank-ke.com.sg Malaysia, and Turkey – IHH also has a presence and investments in (65) 6432 1431 other attractive markets such as the PRC, India, Hong Kong, Vietnam, Macedonia and Brunei. We like its long-term growth story, but believe YEAK Chee Keong, CFA that much of its near-term prospects are priced in. Initiate with HOLD. [email protected] (65) 6433 5730 Big plans ahead. In our view, IHH’s business model is highly scalable, and it is continually seeking growth. Its long-term plan is to expand into Wong Chew Hann attractive markets in Asia and across the CEEMENA region, while [email protected] continuing to strengthen its presence in existing markets. With well- (03) 2297 8686 advanced plans to deliver more than 3,400 new beds over the next four
years, we expect recurring PATAMI to grow at a CAGR of 38% over FY12F-16F.
Healthy structural demand. The healthcare sectors in IHH’s key markets are supported by at least one of the following positive structural
demand factors, namely: (1) high population growth, (2) a growing Stock Information proportion of the elderly, (3) rising affluence leading to demand for Description: An integrated private healthcare services quality healthcare and (4) the growing strain on public healthcare provider with leading positions in Singapore, Malaysia and systems. We believe that these factors limit any downside in revenue. Turkey. Its healthcare networks provide the full spectrum of services, from primary healthcare clinics, to secondary and tertiary hospitals, to quaternary care and post-operative Medical tourism – another boost. Demand for quality healthcare has rehabilitation centres. driven the affluent in developing nations to seek medical treatment in neighbouring countries offering such care. IHH is one of the big players Ticker: IHH MK Shares Issued (m): 8,055.4 in medical tourism and is well-positioned to gain from this trend. Market Cap (MYR b): 8.4 Improvements in international connectivity would lend further support to 3-mth Avg Daily Turnover (US$ m): 15.3 FBMKLCI 1654.4 the growth in medical tourism. Free float (%): 33.8 Deserves premium valuation. We like IHH’s long-term growth story, Major Shareholders: % and believes its size and positioning within the sector justifies a KHAZANAH 45.7 premium valuation to the sector. We peg our TP of MYR3.15 to 1x PEG Mitsui & Co 20.5 (38% CAGR over next five years). However, current share price implies limited upside and we see better potential entry points in the future.
IHH Healthcare – Summary Earnings Table Source: Maybank-KE, *Pro-forma Key Indicators FYEfigures Dec (MYR m) 2011A* 2012F 2013F 2014F ROE – annualised (%) 4.8 Revenue 5,190.8 7,306.5 7,350.0 8,340.8 Net cash (MYR m): (1219) EBITDA 1,094.0 1,561.4 1,621.0 1,875.0 NTA/shr (MYR): 0.62 Recurring Net Profit 245.7 498.5 663.0 811.9 Recurring EPS (sen) 3.0 6.2 8.2 10.1
EPS growth (%) 212.1 102.9 33.0 22.5 DPS (cents) 0.0 0.0 0.0 0.0
PER 104.3 51.4 38.6 31.6 EV/EBITDA (x) 24.5 17.2 16.6 14.3 Div Yield (%) 0.0 0.0 0.0 0.0 P/BV(x) 1.6 1.5 1.4 1.3
Net Gearing (%) 7.8 net cash net cash net cash ROE (%) 2.6 4.8 3.7 4.3 ROA (%) 1.3 3.3 2.6 3.0
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Page 1 of 2
IHH Healthcare 17 October 2011
Contents
Key Investment Merits P3 Dynamics of the Healthcare Industry P5 Holding a Premium Brand in Singapore P8 Hub and Spoke Model in Malaysia P11 Serving the Affluent in Turkey P14 Expanding Presence in other Attractive Markets P16 Other Businesses P16 Size has its Advantages P17 Financials P20 Valuation P26 Key Risks P28 Financial Statements & Ratios P29 Appendix I: Key Management Profiles P30 Appendix II: Hospital Assets, Networks and Key Operating Data P32 Appendix III: Terms for Provision of Report, Disclaimers and Disclosures P35
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Key investment merits
An integrated healthcare player. IHH Healthcare Berhad (IHH) is an integrated healthcare services provider with market-leading positions in Singapore, Malaysia and Turkey. In addition, it also has operations and investments in the PRC, India, Hong Kong, Vietnam, Brunei and Macedonia. Its hospital network offers the full spectrum of healthcare services, ranging from primary healthcare clinics to secondary and tertiary hospitals, to quaternary care and post-operative rehabilitation centres. The core businesses are operated through three key subsidiaries, namely Parkway Pantai Limited (PPL), Acibadem Holding and IMU Health.
Figure 1: Summarised shareholding and group structure
Source: Company
Strong global network of hospitals and medical facilities. IHH operates a network of 4,900 licensed beds in 30 hospitals. In addition, IHH operates medical centres, clinics and ancillary healthcare businesses across eight countries. Through IMU Health, IHH runs a private university in Malaysia which offers medical, dental, pharmacy, nursing, health science and other medical programmes.
Leading positions in three key markets. According to Frost and Sullivan, IHH is the largest private healthcare provider in Singapore, with an estimated market share of 43.9% in terms of the number of licensed beds as at Dec 2011. Its position has been further strengthened by the recent addition of 333 new beds from Mount Elizabeth Novena Hospital in Jul 2012. In Malaysia, IHH holds the No. 2 position, with a network of hospitals under the “Pantai” and “Gleneagles” brands, and holds an approximate market share of 15.1% as at Dec 2010. The Acibadem hospital network is the largest private healthcare provider in Turkey, with a 5.2% market share as at Dec 2011.
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Not resting on its laurels. IHH was formed through a series of M&As and corporate restructuring activities. In the process, Parkway Holdings was delisted from the Singapore Exchange in 2010 at premium valuations. Subsequently, Parkway and Pantai were housed under the PPL umbrella. With the acquisition of Acibadem, the hospital group has grown even bigger. Despite its current size, it is not resting on its laurels. Expansion plans are in place and the group is on a continual lookout for acquisition and expansion opportunities in attractive markets in Asia and across CEEMENA (Central and Eastern Europe, Middle East and North Africa).
Expansion plans mapped out. Over the next four years, IHH plans to add more than 3,400 new beds to its current capacity. This would be delivered through new hospital developments and expansion of its existing facilities. The new beds include about 760 beds which are expected to be managed through HMAs (Hospital Management Agreements).
A magnet for medical travellers. Other than serving its respective domestic markets, IHH also attracts patients from foreign countries seeking medical treatments at its hospitals. This is helped by its recognised brands and reputation for performing highly complex clinical and surgical procedures. Many of its hospitals also embrace new and advanced technologies. Its strong reputation draws quality doctors and medical staff who are recognised as leaders in their fields. Many of its hospitals are accredited with international standards such as the JCI, ISO, MSQH and EFQM certifications. PPL in particular is a strong player in the medical tourism market given that Singapore is a key hub for medical travel in Asia with about 461,000 medical travellers in 2011, based on figures provided by Frost and Sullivan.
Highly scalable model. IHH has demonstrated its abilities in acquiring and integrating hospital chains and creating synergies and efficiency gains. The most successful example would be the integration between the Parkway and Pantai group hospitals. We believe that IHH can replicate this highly scalable business model in various other attractive regions, and it has stated its intention of doing so. With premium branding and size, the success rate for IHH would be much higher than any other healthcare groups in the region, in our view.
Valuation. We value IHH at MYR3.15 per share. Our target price is pegged to a PEG ratio of 1x (38x FY13F PER). We choose the PEG valuation method to take into account the growth potential that would come from IHH’s capital spending on expanding its hospital networks, as the positive earnings impact from these expansions would only show up in the next 3-5 years; IHH has already incurred 75% of the total expansion capex. We forecast recurring EPS to grow by CAGR of 38% p.a over the next 5 years.
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Dynamics of the healthcare industry
Public-sector healthcare fails to keep pace. Healthcare sector developments are tied to a nation’s economic wealth, population growth rate, proportion of aging population and also government policies. As a country progresses, public healthcare systems usually fail to keep pace with the increasing demand for higher quality healthcare services. This is due to the lack of infrastructure funding, overcrowding and shortage of physical and human resources. In addition, demographic factors such as population growth and an aging population add to the strain on the public healthcare systems.
Private healthcare operators fill a need. These factors provide opportunities for private healthcare providers to come in to meet the needs which public healthcare often fails to fulfill. Other than serving the domestic market, private healthcare providers may also attract medical travellers from neighbouring countries seeking better medical treatment due to the lack of proper facilities and services in their home countries.
Government plays a role. The government often plays a critical role in directing greater usage of private services to those who can afford it. It could also introduce certain policies and regulations to promote such activities in order to reduce the burden on public-sector healthcare facilities. An example is means-testing in Singapore, in which subsidies for public healthcare are adjusted based on residents’ income levels.
Ease of air travel further supports medical tourism. The ease of air travel promotes travelling overseas for medical attention. It is common for medical travellers to seek attention from countries within a 4- to 8- hour flight time from their home country.
Attractive regions in developing and emerging markets. While mature economies generally have well-developed healthcare systems, many developing and emerging markets are facing challenges in providing quality healthcare to their residents. These countries tend to have lower ratios of beds and healthcare workers per 1,000 population. In many of these countries, there is a clear trend of a growing population and also a shift towards a higher proportion of the elderly, driven by low birth rates, low mortality rates and improved life expectancy. At the same time, rising affluence also results in a greater demand for improved living standards and higher quality of healthcare. The countries that offer such opportunities for private healthcare operators are generally in Asia, particularly Southeast Asia, and the CEEMENA regions.
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Figure 2: Hospital beds per 1,000 population ratio
OECD average of 3.1
Southeast Asia AsiaCEEMENA Developed
Source: Frost & Sullivan, IPO Prospectus
Figure 3: Doctors per 1,000 population ratio
OECD average of 2.9
Southeast Asia AsiaCEEMENA Developed
Source: Frost & Sullivan, IPO Prospectus
Figure 4: Registered nurses per 1,000 population
OECD average of 8.4
Southeast Asia AsiaCEEMENA Developed
Source: Frost & Sullivan, IPO Prospectus
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Figure 5: Population growth in selected countries
Source: WEO Database, Sep 2011, Frost & Sullivan, IPO Prospectus
Figure 6: Healthcare expenditure in several markets Healthcare Expenditure Growth per Healthcare Expenditure as % of capita (2006 – 2009) GDP (2011)
Rapid Strong further Development growth potential
IHH Home Markets IHH Key Markets Developed Markets
Source: IPO Prospectus
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Holding a premium brand in Singapore
Well-developed healthcare model. Singapore operates a well- developed healthcare system in which service delivery is split between public and private systems. The public system is managed by the Ministry of Health (MOH), which ensures that residents receive quality and affordable medical care through subsidised charges. However, with the liberalisation of private medical insurance and increasing strain on the public healthcare system, more patients are opting for private healthcare.
Admission figures on the rise. Overall hospital admissions in Singapore have been growing at a CAGR of about 2.5% from 2006 to 2011. Private hospital admissions accounted for about 24% of total admissions, with some signs that private hospital admissions have been growing at a marginally faster pace than public hospital admissions in recent years. This is attributed to long waiting times in public hospitals, higher disposable income, and private insurance coverage.
Figure 7: Total hospital admissions & growth Figure 8: Hospital admissions share, Private vs. Public
Source: MOH Singapore, Maybank-KE Source: MOH Singapore, Maybank-KE
Strained public healthcare system. Singapore faces a bed shortage situation in its public healthcare system, due to a more rapid increase in demand relative to supply. The total number of hospital beds stood at about 11,509 as at end-2010, out of which 24% are private hospital beds. The opening of Khoo Teck Phuat Hospital in 2010 added 550 beds to the public sector capacity, but the next significant addition would only be in 2014. Public hospitals currently run at high occupancy rates of 80% to 95%, based on MOH statistics. The demand side has been driven by high population growth, including the influx of foreigners, and a growing proportion of those aged 65 and above.
Supply growth lags demand. While there are plans for new supplies of public hospital beds, this is not expected to be able to keep pace with demand growth. Private healthcare will still play a critical role in alleviating the strain in supply. According to Frost & Sullivan, private hospital revenue will grow at a CAGR of 7.7% between 2011 and 2016, which bodes well for PPL.
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Figure 9: Supply of public hospital beds would not meet demand No. of New Hospital/Expansion Scheduled opening beds Ng Teng Fong General Hospital 700 2014 Jurong Community Hospital 286 2015 KhooTeckPuat Hospital rooftop garden conversion 32 2013 Integrated building near Changi General Hospital 250 2014 Community hospitals at Yishun and Outram 800 2015 Seng Kang General Hospital 1,400 2018 Source: MOH Singapore, Maybank-KE
Figure 10: Private hospital growth trend, Singapore
Source: Frost & Sullivan, IPO Prospectus
PPL is a key private healthcare player. There are currently seven private hospitals in Singapore. PPL operates three of these: Gleneagles Hospital, Mount Elizabeth Hospital and Parkway East Hospital. According to Frost & Sullivan, PPL had a 43.9% market share in terms of number of private licensed beds in 2011, and a 69.3% share in terms of private hospital industry revenue, in 2010.
Figure 11: Private sector market share, Singapore
Source: Frost & Sullivan, Maybank-KE
Synonymous with premium quality. PPL is also known for operating one of the most expensive hospitals on the island. The “Parkway” branding is synonymous with premium and high-quality healthcare. PPL’s Mount Elizabeth Hospital holds the reputation as the premium brand hospital in Singapore, attracting overseas patients seeking the best and most advanced medical treatments in the region.
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An established medical tourist hub. Singapore is one of the most popular medical tourism hubs in Southeast Asia, especially for its expertise in oncology, organ transplants, cardiology and neurological surgery. The bulk of the medical tourists comes from Indonesia (47%), followed by Malaysia (14%). In 2010, Singapore recorded medical tourism revenue of SGD856m, a 10.1% YoY growth. The revenue from, and volume of, medical travellers is expected to grow by a CAGR of 14.7% and 13.1% respectively between 2011 and 2016.
Figure 12: Medical travel market size, Singapore
Source: Frost & Sullivan, IPO Prospectus
Raising the standard with Mount Elizabeth Novena Hospital. This new hospital by PPL has a capacity of 333 beds and 13 operating theatres. The first phase has been completed, with 180 beds added in July 2012. The remainder is projected to be operational by the second half of 2013. The total cost of the hospital development is estimated at SGD2.0b, of which SGD1.8b was incurred in FY11. Mount Elizabeth Novena Hospital will raise PPL’s capacity by 46% upon its full opening, in terms of number of beds.
The hospital will be the first private hospital in Singapore to offer various state-of-the-art medical technologies. Located within the Mount Elizabeth Novena Hospital would also be the Mount Elizabeth Novena Specialist Centre, which would contain 254 dedicated medical office suites with a GFA of about 173,935 sqft. 216 of these units have been sold to specialist doctors at an average price of SGD3,819 psf. PPL would retain the balance units for its own use.
Figure 13: Mount Elizabeth Novena Hospital
Source: Company website
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Hub and spoke model in Malaysia
A two-tier healthcare system. Malaysia operates a two-tier health system, split between the public and private sectors. Public healthcare is provided and managed by the Ministry of Health (MOH) and funded by the tax system. It is also heavily subsidised by the government and is used by the majority of the country’s population of 28m. The private system, on the other hand, is user-charged and demand is mainly driven by the more affluent who seek shorter waiting times as well as a higher quality of care and service. The private sector is beginning to play a more important role in alleviating the strain on the public healthcare system. The healthcare sector is also one of the 12 National Key Economic Areas (NKEAs) identified as drivers of economic activity in Malaysia’s Economic Transformation Programme (ETP).
Rising hospital admissions. Owing to demographic and economic factors similar to those in Singapore, hospital admission rates are also rising in Malaysia. Inpatients and outpatients are growing in both the public and private sectors. However, statistics show that admissions in the private sector are growing at a much higher rate than in the public sector.
Figure 14: Public-sector admission figures, Malaysia Figure 15: Private-sector admission figures, Malaysia
Source: MOH Malaysia, Maybank-KE Source: MOH Malaysia, Maybank-KE
Double-digit growth in the size of the private hospital market. With governmental support, the healthcare industry is expected to see continual expansion and more public-private integration in order to relieve the strained resources of the public sector. As a result, both public and private healthcare expenditure is expected to increase over the next five years.
Private healthcare sector revenue will be driven by a greater uptake of private insurance and a rise in medical travellers seeking a cheaper alternative to Singapore and Thailand. As in Singapore, the structural drivers of population growth, an aging population and rising affluence are also factors in Malaysia’s healthcare demand growth. The following figure illustrates Frost &Sullivan’s forecast for the growth of private hospitals market size in Malaysia; they estimate private hospital revenue CAGR of 18.1% between 2011 and 2016.
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Figure 16: Private hospital growth trend, Malaysia
Source: Frost & Sullivan, IPO Prospectus
Plenty of room for medical tourism growth. We believe that there is plenty of room for the growth of medical tourism in Malaysia. The medical travel market grew from MYR253.8m in 2007 to MYR509.8m in 2011, a CAGR of 19% over the period. In 2011, about 4% of PPL’s Malaysian hospital revenue was derived from medical travellers, 90% of which were from Indonesia.
Malaysia is a cost-competitive destination for medical travellers who are less affluent but seek better quality healthcare than their home country can provide. According to Frost & Sullivan, patients from Sumatra tend to travel to Penang or Melaka for medical treatment, while more affluent patients from Jakarta and Surabaya prefer Singapore. Therefore, we do not think that developing the medical travel market of PPL’s Malaysian hospitals would cannibalise the medical tourism of its Singapore hospitals, but would instead promote the growth of the overall size of the medical travel market in the region.
Figure 17: Medical travel market size, Malaysia
RM
Source: Frost & Sullivan, IPO Prospectus
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PPL is the second-largest private healthcare player in Malaysia (after KPJ Healthcare), with 11 hospitals and 2,025 licensed beds currently. It owns and operates nine “Pantai” hospitals and two “Gleneagles” hospitals across Peninsular Malaysia. Of these, two are JCI-accredited while seven are accredited by the MSQH. Three new hospitals in the pipeline and expansion plans for four of its existing hospitals would add about 1,138 new beds by 2015, raising PPL’s bed capacity in Malaysia by 56%. According to Frost & Sullivan, PPL holds a market share of about 15.1% in terms of the number of licensed beds as at 31 Dec 2010.
Figure 18: Private sector market share, Malaysia
Source: Frost & Sullivan, Maybank-KE
Operating via a “hub and spoke” model. PPL’s hospital network in Malaysia operates via a “hub and spoke” model. Hub hospitals have a higher number of specialist doctors and operate a wider array of specialty medical services, with more advanced equipment relative to spoke hospitals. Hub hospitals are also typically located in large urban centres. The Spoke hospitals operate in smaller urban centres and large towns. Generally, Hub hospitals have 180 to 350 licensed beds with more than 30 specialist doctors, while Spoke hospitals have 80 to 150 licensed beds with between 15 and 30 specialist doctors.
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Serving the affluent in Turkey
Healthcare system in Turkey. The Ministry of Health, the Social Security Institution, the Ministry of Education, other ministries and private healthcare institutions are the main healthcare providers in Turkey. Turkey also has a Universal Health Insurance (UHI) scheme which is provided by the Social Security Institution (SosyalGuvenlikKurumu – SGK). The UHI provides basic coverage to all residents through public hospitals. Those who are covered by SGK may also receive medical services in private hospitals that have agreements with SGK. Private hospitals under the SGK may charge a premium (30-90%) above SGK tariffs for serving such patients.
Leading position in Turkey. IHH completed the acquisition of a 60% indirect interest in Acibadem Holding in Jan 2012 for a purchase consideration of USD823m. Acibadem operates the largest private healthcare network in terms of the number of non-SGK and partial-SGK beds in Turkey. The Acibadem brand has been providing high-quality medical care and services in Turkey since 1991, and operates a network of 14 hospitals with more than 1,800 licensed and operational beds today. This represents an approximate 5.2% market share in Turkey’s fragmented private healthcare market, where there are a total of about 28,063 private hospital beds.
Figure 19: Private sector market share, Turkey
Source: Frost & Sullivan, Maybank-KE
Serving affluent patients. Acibadem hospitals and outpatient clinics target primarily the more affluent patients in Turkey, in particularly those in Istanbul. Its other “AileHastanesi” brand hospitals target the mid- income patients.
Growing medical tourism industry. Turkey is also emerging as an important medical travel hub, attracting patients from the CEEMENA region. Its strategic location draws patients from Europe, Asia and the Middle East who seek quality healthcare. Turkey has the highest number of JCI-accredited hospitals in the world, at 38. Acibadem has six JCI-accredited hospitals. Frost & Sullivan estimate the size of the medical travel market in Turkey at USD332m in 2011. They expect the market to grow at a CAGR of 19.8% over 2011 to 2016, to USD843m.
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Figure 20: Medical travel market size, Turkey
Source: Frost & Sullivan, IPO Prospectus
Growth and consolidation expected. The implementation of the UHI is expected to spur the growth of the healthcare market in Turkey. In addition, the common factors that we have mentioned such as rising affluence, aging population, growing medical travel industry also applies to Turkey’s healthcare industry. With the fragmented nature of the industry, we also expect further industry consolidation which presents good opportunities for IHH to extend its presence in the market. According to Frost & Sullivan, the private healthcare market is expected to grow by a CAGR of 5.7% between 2011 and 2016.
Figure 21: Private hospital growth trend, Turkey
Source: Frost & Sullivan, IPO Prospectus
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Expanding its presence in other attractive markets
IHH also has a presence in other growth markets such as the PRC, Hong Kong, India and CEEMENA region. In China, PPL operates eight medical centres in Shanghai and Chengdu, serving the affluent. It was also appointed operator of a 450-bed hospital in the Shanghai International Medical Zone (SIMC). In Hong Kong, PPL has a clinic in Central and is looking at expanding its clinic network. It also intends to bid for landmark greenfield hospital sites. IHH has regularly entered into JVs, consultancy agreements as well as HMA agreements (agreements to manage operational hospitals), which allow it to expand its presence in various other attractive markets.
Other businesses
Education business. IHH runs an education business mainly through IMU Health, through which it owns and operates International Medical University (IMU), a private university that offers a total of 18 academic programmes including medicine, dentistry, pharmacology, nursing, health sciences and complementary medicine. As at 2Q12, IMU had more than 3,100 students enrolled and reported MYR40.4m in revenues and about MYR18m in EBITDA. IMU’s main campus is located at Bukit Jalil in Kuala Lumpur, Malaysia, and its main clinical school is at Seremban, Negeri Sembilan, Malaysia. The clinical school is supported by smaller clinical schools in Kuala Pilah, Negeri Sembilan and in BatuPahat, Johor.
Parkway Life REIT. IHH owns a 35.8% equity interest in Parkway Life REIT (PLife REIT), listed on the SGX. Its three PPL hospital properties in Singapore – Gleneagles Hospital, Mount Elizabeth Hospital and Parkway East Hospital – are owned by PLife REIT; PPL leases the properties from it. In addition, IHH also owns a 100% equity interest in Parkway Trust Management, the manager of PLife REIT. IHH is entitled to PLife REIT’s distributions and to 100% of its management fees. PLife REIT owns 36 properties with a carrying book value of SGD1.5b as at Mar 2012.
Apollo Hospitals. IHH also owns an 11.2% equity interest in Apollo. Apollo is one of India’s largest private healthcare providers and is listed on the Bombay Stock Exchange and the National Stock Exchange of India. A new 450-bed Gleneagles Khubchandani Hospital, located in Mumbai, is scheduled to open by end 2012.
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Size has its advantages
Creating synergies and efficiencies. There are several advantages to having scale in the healthcare industry. For IHH, the opportunities for synergies and better efficiencies include: (1) Better pricing and efficiency in sourcing and procuring medical supplies, (2) More effective marketing efforts,
(3) Stronger cross referrals across its hospital networks,
(4) Strong ability to attract and retain healthcare professionals, and
(5) Streamlined administrative functions.
These advantages were proven in the integration between Parkway and Pantai, which saw savings of about MYR115m between Apr and Dec 2011, due to the synergies created.
Expansion plans and hospital beds ramp-up. IHH is not stopping at its current size. It has several expansion plans already in the pipeline, which would see its number of licensed beds grow by more than 3,400 beds to more than 8,300 by 2015 (+69%). Other than strengthening its presence in its key current home markets of Singapore, Malaysia and Turkey, IHH also has several expansion plans in various attractive markets such as India, Hong Kong, PRC and the CEEMENA region.
Figure 22: Hospital bed additions in the pipeline Beds Addition FY12 FY13 FY14 FY15 Singapore 180 153 0 0 Mount Elizabeth Novena Hospital 180 153
Malaysia 188 0 300 650 Gleneagles Medical Centre Penang 188 Gleneagles Medini 300 Pantai Hospital KL 120 Pantai Hospital Manjung 100 Gleneagles KL 100 Pantai Hospital Klang 80 Gleneagles Kota Kinabalu 250
Turkey 235 34 330 120 Acibadem Ankara Hospital 78 AcibademBodrum Hospital 76 34 AcibademSistina Skopje Clinical Hospital 81 AcibademMaslak Hospital 120 Two potential hospital development projects 330
India 450 0 0 0 Gleneagles Khubchandani Hospital 450
Hong Kong 0 313 0 0 Bidding for landmark greenfield hospital sites 313
PRC 0 0 450 0 SIMC 450
Total 1053 500 960 890 Source: Company, Maybank-KE
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Figure 23: Growth in hospital beds in the next 5 years
Source: IPO Prospectus, Maybank-KE
Well positioned to capture medical tourism market. With its integrated network and dominant market positions in Singapore, Malaysia and Turkey, IHH is well placed to capture the medical travel market. Its strategic positioning puts it within a 4- to 8-hour flight radius of key medical travel markets. The medical tourism hubs also have special niches which cater to specific segments of medical travellers.
Figure 24: Strategically located to tap on medical tourism market
Source: IPO Prospectus, Maybank-KE
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Figure 25: Medical tourism niches of key countries Price Benchmark JCI Capability to perform complex procedures Diversity of patients Country (Avg cost of selected Accredited (relative to other medical travel hubs in region (Top countries) surgeries in USD) Hospitals Indonesia > 47.0% High Coronary Artery Bypass Malaysia 14.0% Key treatments: Cardiology, Cardio-thoracic Graft (CABG): 20,000 Russia, Vietnam > 4.0% each Singapore 14 surgery, Orthopaedics surgery, Reconstructive Hip replacement: 11,000 Middle East, Europe, Korea surgery and Oncology Rhinoplasty: 4,375 >3.5% (each) North America >1.0% Medium-High Indonesia 75.0% Key treatments: Cardiology, Cardio-thoracic CABG: 9,000 Singapore/Middle East/Others Malaysia surgery, Orthopaedics surgery, In-vitro fertilisation Hip replacement: 10,000 21.0% 6 (IVF), Reconstructive surgery, and dental related Rhinoplasty: 2,083 India 4.0% treatment Germany 39.0% High Holland 8.0% CABG: 10,000 Key treatments: Ophthalmology, Dental Austria 5.0% Turkey Hip replacement: 10,750 38 Orthopaedic, Cardiology, Reconstructive surgery, Azerbaijan, Russia, Iraq, France Rhinoplasty: 3,500 Oncology, and Neurosurgery 3.0% (each) Belgium 2.0% UAE > 40.0% CABG: 13,000 Medium-High Qatar 9.0% Thailand Hip replacement: 12,000 13 Key treatments: Botox and face lift Oman 6.0% Rhinoplasty: 2,500 Japan, Myanmar >5.0% Source: Frost & Sullivan, IPO Prospectus
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Financials
Strong and stable revenue growth. Underpinned by solid demand fundamentals in the healthcare sector, IHH experienced strong revenue CAGR of 15.9% between 2009 and 2011, while EBITDA grew by CAGR of 16.6% over the same period. We believe that demand for healthcare services will continue to be robust given positive structural demand factors. IHH’s revenue base is now larger with the acquisition of the 60% interest in Acibadem. The growth in demand, coupled with IHH’s bed additions from its expansion plans, will drive an expected revenue and recurring PATAMI CAGR of 16% and 38% respectively over FY12F to FY16F. We also expect increasing revenue intensity at most of its hospitals as it takes on more complex cases.
Differences in revenue models. A key point to note is that Acibadem’s revenue is accounted for on a gross basis (inclusive of doctor consultation fees), while PPL’s revenue is accounted for on a net basis. Most medical practioners in Singapore and Malaysia are independent and buy or lease spaces from PPL. PPL will only bill patients on hospital services and not on consultation fees. In contrast, most doctors in Acibadem are under a full or part-time employment contract and operate under a revenue-sharing model with Acibadem.
Segmental breakdown based on geography. Based on 1H12 figures, the bulk of IHH’s revenue share came from Acibadem Holding and PPL’s Singapore operations. Acibadem operates mainly in Turkey and its patients come from the CEEMENA region. In terms of EBITDA, Singapore accounted for the bigger share although EBITDA from Acibadem is a close second. Malaysia operations accounted for the third biggest share in terms of both revenue and EBITDA.
Figure 26: 1H12 Revenue breakdown by geography Figure 27: 1H12 EBITDA breakdown by geography
1H12 1H12 Revenue EBITDA
Source: IPO Prospectus, Maybank-KE Source: IPO Prospectus, Maybank-KE
Turkey operations ramping up. Acibadem has been loss-making at the net profit level prior to and including FY11, although it was profitable at the EBITDA level. In FY11, Acibadem reported a net loss of MYR220.7m, dragging down IHH’s pro-forma PATAMI to only MYR245.7m. This was partly related to unrealized forex losses due to
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unfavourable currency movements. A significant amount of Acibadem’s debt was in USD and other foreign currencies, which strengthened against the Turkish Lira in 2011. However, we believe the losses were largely due to several Acibadem hospitals being in the ramping-up phase. For 1H12, Acibadem showed a positive profit of MYR12.5m. Going forward, we do expect Acibadem to contribute positively to IHH’s overall profit in FY12 and beyond.
Efficiency gains from size. IHH would also see some efficiency gains from synergies in its operations; we expect this to manifest as an improvement in operating margins, as operational expenses as a percentage of revenue trend down. We therefore expect to see EBITDA on a rising trend, especially on FY13F onwards where there is no more recognition from the sales of its medical suites in Mount Elizabeth Parkway Novena Hospital. We project EBITDA margins of 21.4% in FY12F and 22.1% in FY13F (FY11A: 21.1%).
Figure 28: Margins estimates Figure 29: 1H12 Cost Structure (exc development)
% of revenue 89.1 Total Operating lease expenses 4.8% 132 171 6.2% Depreciation & 289 10.5% Amortisation 249 9.0% Other op. costs
575 20.8% Purchased & contracted services Inventories & consumables 1047 37.9% Staff costs
1H12
Source: Company, Maybank-KE Source: Company, Maybank-KE,
Recognition of sales of medical suites. The total proceeds from the sales of the medical suites in Mount Elizabeth Novena Hospital was MYR1,210m (SGD487m), which was recognized in 2Q12. This contributed MYR238m in EBITDA and an estimated MYR304m in net profit in the same period. From FY13 onwards, this will cease to be a feature of profitability. Operating lease expenses. IHH leases some of its hospital facilities. The three hospital properties in Singapore which it leases from Parkway Life REIT accounted for a majority of its operating lease expenses of MYR132.1m in 1H12. However, PPL also owns 35.8% of Parkway Life REIT and is therefore entitled to part of its distribution yield. EBITDA margins for its PPL Singapore, at 18.9% in 1H12, therefore appear to be lower relative to the overall Group’s 21.0%. The Singapore leased properties are under Master Lease Agreements, in which the rent payable is based on the higher of (i) aggregate of a base rent and a variable rent tied to 3.8% of the hospital’s adjusted revenue; and (ii) total rent paid in preceding year, adjusted for growth in the Singapore CPI plus 1% of such total rent paid in the preceding year. 1H12 results. 1H12 revenue rose by 137% YoY while corresponding PATAMI showed a 197% YoY increase. This was mainly due to the recognition from sales of the medical suites in Mount Elizabeth Novena Hospital. Excluding this, revenue rose by 65% YoY while corresponding PATMI rose by 35% YoY. This was due to maiden contributions from
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Acibadem, as well as increases in inpatient admissions and higher average revenue per patient day in PPL’s Singapore and Malaysia operations. Excluding Acibadem, PATAMI still rose a healthy 28% during the same period.
Figure 30: 1H12 results % chg Income Statement (MYR m) 1H12 1H11 YoY Remarks Includes sale of medical suites Revenue 3,973.7 1,675.9 137.1 MYR1,209.6m Inventories and consumables (574.7) (349.9) 64.3 Purchased and contracted services (249.3) (206.8) 20.5 Staff cost (1,046.8) (540.1) 93.8 Rental of premises (132.1) (89.6) 47.4 Other Op. Income 200.2 91.9 117.8 Other Op. Expenses (288.7) (191.3) 50.9 Development cost (971.2) 0.0 nm EBITDA 911.0 390.1 133.5 Higher depreciation from ramp-up of Depreciation (171.1) (78.0) 119.4 hospitals Amortisation (32.6) (38.2) -14.8 EBIT 707.3 273.9 158.2 Finance Income 39.5 10.9 263.6 Interest Expense (102.4) (73.8) 38.7 JV Income 7.7 7.3 5.9 Associates Income 25.9 23.7 9.6 EBT 678.1 241.9 180.3 Taxation (122.3) (54.6) 123.9 Net Profit 555.8 187.3 196.8 Minority Interest (28.4) (8.7) 225.1 Includes sale of medical suites PATAMI 527.4 178.5 195.4 MYR193.6m Source: Company, Maybank-KE
Paring down its debt. 90.9% of the gross IPO proceeds has gone towards paring down the MYR957m and MYR3,706m of term loan facilities which were taken respectively for the acquisition of Acibadem Group and the privatisation of Parkway. This has improved IHH’s gearing significantly, from 51% net-debt/equity (450% net-debt/NTA) as at 30 June 2012 to 7% net-debt/equity (24% net-debt/NTA). We estimate the reduction in debt would also result in yearly interest savings of about MYR120m.
Figure 31: Reduction in net debt/ NTA
Jun-12 Post-IPO 4.5
0.51 0.07 0.24
Net debt/ Equity Net debt/ NTA
Source: Company, Maybank-KE
Much of its planned capex has been spent. IHH has already incurred about 75% of its planned MYR6.5b expansion, including MYR3.3b in land cost. The total outstanding expansion capex expected to be incurred from 2H12 to FY15 is about MYR1.74b. Overall capex should therefore trend lower towards our estimated yearly maintenance capex of about MYR400m after FY15F. Barring any significant additional capex, we estimate that yearly free cashflows would be sustained above the MYR1b level from FY14F.
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Figure 32: Capex plans Expansion capex Country Hospital No. of Beds Completion FY12 FY13 FY14 FY15 Singapore Mount Elizabeth Novena Hospital 333 2012 514
Malaysia Gleneagles Medical Centre Penang 188 end 2012 57 43 Pantai Hospital KL 120 end 2014 46 76 76 Gleneagles Medini 150 - 300 end 2014 46 174 174 Gleneagles KL 100 mid 2015 0 8 8 8 Pantai Hospital Klang 80 mid 2014 6 22 22
India Gleneagles Khubchandani Hospital 450 end 2012 220 27
Turkey Acibadem Ankara Hospital 78 3Q 2012 70 AcibademBodrum Hospital 76 - 110 2012 - 2013 48 26 AcibademSistina Skopje Clinical Hospital 81 end 2012 14 AcibademMaslak Hospital 120 2014 30 63 63 Budgeted capex 2014 73 82 82 Total Expansion capex 1,124 522 426 8
Maintenance capex Singapore & General 292 250 250 250 Malaysia Turkey General 178 150 150 150 Total Maintenance capex 470 400 400 400
Total capex 1,594 922 826 408 Source: Company, Maybank KE estimates
Large amount of goodwill and intangibles on its books. IHH has a large amount of goodwill and intangibles on its books as a result of its acquisitions. The total amount of goodwill as at 2Q12 was MYR8.7b, with another MYR3.0b in intangibles. After adjusting for goodwill and intangibles, NTA works out to be MYR5.0b or MYR0.62 per share.
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Figure 33: Breakdown of revenue, EBITDA and EBITDA margin forecasts FY11 FY12F FY13F FY14F Revenue (MYR m) Hospitals Singapore 1,180 1,411 1,885 2,121 Malaysia 922 1,038 1,173 1,281 Turkey 1,703 2,159 2,395 2,623 International 67 130 400 670 Total 3,872 4,738 5,853 6,694
Healthcare Singapore 710 778 855 941 Malaysia 29 50 55 60 Turkey 243 159 174 192 Others 143 164 181 199 Total 1,126 1,150 1,265 1,392
Education IMU 157 169 188 203 Others 14 12 16 20 Total 171 181 204 223
Non-Healthcare 22 24 28 32
Sale of Medical Suites 1,210 - - Total Revenue 5,191 7,303 7,350 8,341 EBITDA (MYR m) Hospitals Singapore 180 235 320 371 Malaysia 222 252 293 327 Turkey 344 481 551 616 International 16 29 93 161 Total 761 997 1,258 1,475
Healthcare Singapore 109 135 150 165 Malaysia 15 23 26 28 Turkey 36 39 35 38 International 50 34 54 60 Total 210 230 264 291
Education IMU 61 68 75 81 Others 9 8 10 12 Total 70 76 85 93
Non-Healthcare -12 19 14 16
Sale of Medical Suites 238 - - Total EBITDA 1,030 1,561 1,621 1,875 EBITDA Margins (%) Hospitals Singapore 15.2% 16.7% 17.0% 17.5% Malaysia 24.1% 24.3% 25.0% 25.5% Turkey 20.2% 22.3% 23.0% 23.5% International 23.1% 22.5% 23.4% 24.0% Total 19.7% 21.0% 21.5% 22.0%
Healthcare Singapore 15.3% 17.4% 17.5% 17.5% Malaysia 52.4% 46.2% 46.6% 47.0% Turkey 14.8% 24.4% 20.0% 20.0% International 34.8% 20.5% 30.0% 30.0% Total 18.7% 20.0% 20.9% 20.9%
Education IMU 39.0% 40.2% 40.0% 40.0% Others 64.9% 69.7% 60.0% 60.0% Total 41.1% 42.2% 41.6% 41.8%
Non-Healthcare -53.4% 78.7% 50.0% 50.0%
Sale of Medical Suites 19.7% EBITDA Margin 19.8% 21.4% 22.1% 22.5% Source: IPO Prospectus, Maybank-KE
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Figure 34: Key hospital operating data and assumptions used in forecasts FY09 FY10 FY11 FY12F FY13F FY14F FY15F FY16F Singapore No. of hospitals 3 3 3 4 4 4 4 4 No. of licensed beds 1,008 743 730 910 1,063 1,063 1,063 1,063 No. of operational beds 724 714 716 907 1,060 1,060 1,060 1,060 Inpatient admissions 46,961 49,182 51,036 56,794 74,451 79,288 82,680 88,192 Avg length of stay 3.4 3.3 3.3 3.3 3.3 3.3 3.3 3.3 Occupancy 60.0% 62.0% 64.0% 56.6% 63.5% 67.6% 70.5% 75.2% Avg revenue per patient day (SGD) 1,962 2,091 2,275 2,464 2,593 2,722 2,858 3,001 Avg revenue per patient day (MYR) 4,709 5,018 5,460 5,950 6,275 6,587 6,916 7,263
Malaysia (Hub and Spoke) No. of hospitals 11 11 11 12 12 13 18 18 No. of licensed beds 1,993 1,993 2,010 2,213 2,213 2,513 3,163 3,163 No. of operational beds 1,781 1,835 1,878 2,099 2,099 2,399 3,049 3,049 Inpatient admissions 146,200 152,286 154,823 164,721 178,835 185,763 225,195 271,361 Avg length of stay 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 Occupancy 64.2% 65.1% 63.0% 59.7% 65.4% 59.4% 56.7% 68.3% Avg revenue per patient day (SGD) 482 542 583 614 642 674 709 744 Avg revenue per patient day (MYR) 1,156 1,301 1,399 1,483 1,554 1,632 1,716 1,800
Turkey No. of hospitals 9 11 14 17 17 19 20 20 No. of licensed beds 1,232 1,473 1,751 2,036 2,070 2,400 2,520 2,520 No. of operational beds 1,232 1,473 1,751 2,036 2,070 2,400 2,520 2,520 Inpatient admissions 52,869 66,428 88,525 115,280 126,935 134,673 159,420 173,376 Avg length of stay 3.2 3.5 3.5 3.3 3.3 3.3 3.3 3.3 Occupancy 54.9% 66.5% 79.5% 51.2% 55.4% 50.7% 57.2% 62.2% Avg revenue per patient day (SGD) 1,085 1,136 1,133 1,287 1,347 1,415 1,485 1,560 Avg revenue per patient day (MYR) 2,602 2,724 2,718 3,107 3,260 3,424 3,595 3,775
IMU Total programmes offered 14 15 17 18 18 18 18 18 Total student enrolment 2,631 2,928 2,963 3,195 3,400 3,500 3,600 3,700 Source: IPO Prospectus, Maybank-KE estimates 1 Reflects 3 hospitals opened in 2009 that were ramping up and not operational for the full year 2 Comprises data for only 11 hospitals as 3 hospitals were only acquired in 2H11, where the operational data were recorded and classified differently with the rest of the other existing hospitals.
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Valuation
PER-to-growth (PEG) valuation. We value IHH at MYR3.15 per share, pegged to 1x PEG (38x FY13F PER). We choose the PEG valuation method to take into account the growth potential that would come from IHH’s expansion plans. The positive earnings impact from these expansion plans would only materialise in the next 3-5 years, but IHH has already incurred 75% of the total expansion capex. We forecast recurring EPS to grow by a CAGR of 38% p.a over the next five years.
Figure 35: Peer Comparison Mkt Net TP Cap Price PER (x) PEG EV/EBITDA (x) P/B ROE Gearing DivYld Company Rating (lcl) USD b (lcl) Y-1 Y Y+1 (x) Y Y+1 (x) (%) (%) (%) Asia-listed Raffles Medical SGD BUY 2.71 1.13 2.54 25.9 25.1 20.8 1.7 17.7 15.4 3.8 16.2 (8.4) 1.6 Apollo Hospitals INR N.R. N.A. 1.97 750.45 44.6 34.0 27.3 1.5 17.3 14.1 4.0 10.0 15.7 0.5 Fortis Healthcare INR N.R. N.A. 0.80 105.20 59.0 na 43.8 na 15.2 12.6 1.3 2.2 149.1 na Bangkok Dusit THB N.R. N.A. 5.28 105.00 24.2 26.7 24.8 1.0 18.3 16.4 4.8 18.4 37.0 1.0 Bumrungrad THB N.R. N.A. 1.86 78.25 29.8 25.7 25.2 1.3 18.0 16.3 7.8 24.8 54.9 1.6 KPJ Healthcare MYR HOLD 5.79 1.28 6.12 24.8 25.1 21.9 1.6 14.8 12.8 3.9 17.3 19.2 2.0 Ramsay Health Care AUD N.R. N.A. 4.86 24.61 21.8 18.5 16.5 1.4 9.5 8.7 4.2 20.4 63.7 3.5 Average 32.9 25.8 25.7 1.4 15.8 13.8 4.3 15.6 47.3 1.7
Global-listed Tenet Healthcare USD N.R. N.A. 2.47 23.67 15.6 10.8 8.8 1.0 5.8 5.5 2.2 4.6 281.6 na LifePoint Hospitals Inc USD N.R. N.A. 2.02 41.39 11.6 12.3 11.1 1.3 6.2 5.8 1.0 8.5 74.1 na Health MgmtAssociates USD N.R. N.A. 1.96 7.64 10.2 8.8 7.8 0.7 5.7 5.5 1.8 21.1 343.8 na Community Health Systems USD N.R. N.A. 2.55 28.01 5.8 7.5 7.0 0.6 6.3 6.1 1.0 8.8 304.8 na Universal Health Services USD N.R. N.A. 4.39 45.33 11.3 10.5 9.4 0.9 6.6 6.2 1.7 18.6 140.8 0.4 HCA Holdings USD N.R. N.A. 13.62 30.92 9.0 8.5 8.2 0.8 6.4 6.2 na na na na Average 10.6 9.7 8.7 0.9 6.2 5.9 1.5 12.3 229.0 0.4 Source: Bloomberg, Maybank-KE
Sum-of-the-parts (SOTP) valuation. As a cross-check, we also use an SOTP methodology to value IHH’s individual core businesses. We value PPL, Acibadem and IMU using an EV/EBITDA relative valuation and adopt market values for IHH’s stakes in listed entities, Parkway Life REIT and Apollo. Our SOTP-based value comes up to MYR2.96 per share. We believe that IHH deserves a premium valuation for the following reasons, and have therefore assigned an above-average EV/EBITDA multiple on PPL: 1. Being one of the largest listed healthcare groups in the world, IHH has strong bargaining power with suppliers and would also benefit from higher operational efficiency;
2. Its premium branding attracts high-profile healthcare professionals, who in turn would attract patients seeking the best treatments to its hospitals, resulting in higher revenue intensity than other competing hospitals;
3. It has already mapped out an expansion plan which would see bed capacity increase by more than 3,400 to more than 8,300 by 2015, from 4,900 currently.
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Figure 36: SOTP Valuation Valuation Equity Value Per Share Stake Basis (MYR m) (MYR) Remarks PPL 100.0% 18x FY13F EV/EBITDA 17,281 2.14 Premium to peer-average Acibadem 60.0% 14x FY13F EV/EBITDA 4,921 0.61 Peer average IMU 100.0% 14x FY13F EV/EBITDA 1,052 0.13 Peer average Parkway Life REIT 35.8% Mkt Value 1,088 0.13 Apollo 11.2% Mkt Value 702 0.09 Enterprise Value (MYR m) 25,043 3.11 Net cash/(debt) (1219) (0.15) Equity Value (MYR m) 23,824 2.96 No. of shares (m) 8,057 Value per share (MYR) 2.96 Source: Maybank-KE
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Key risks
Changes in regulations and policies. IHH operates its healthcare businesses in various countries and is subject to the respective regulations in the operating markets. Hence, any unfavourable changes in the regulations and policies by local governments may affect IHH’s businesses adversely.
Fluctuations in currencies. A large portion of IHH’s businesses are located outside of Malaysia. Other major operating markets include Singapore and Turkey, where earnings are denominated in SGD and TRY respectively. As such, any adverse movements in the local currencies against MYR will result in translation impacts to the consolidated financial statements, which are denominated in MYR.
Competition both locally and regionally. Competition may be intense if there are substantial increases in investments in local healthcare infrastructure (bed capacities of public hospitals) by local governments. Additionally, there is also increasing competition from neighbouring countries. For instance, Thailand, which has a strong position as a medical hub in Asia, could also attract Singaporean, Indonesian and Malaysian patients.
Execution risks in expansion plans. Given its aggressive growth plans, IHH faces huge execution risks in delivering on its planned expansions. In the event that it fails to execute on the intended expansion plans, its future earnings and our forecasts could be materially affected. In addition, given that new hospital projects normally have a gestation period, IHH may take 2-5 years to reach its intended operating levels. Other risks include ability to attract and retain healthcare professionals and higher startup costs than expected.
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FINANCIAL STATEMENTS AND RATIOS
PROFIT AND LOSS (MYR m) Pro-forma CASH FLOW (MYR m) Pro-forma FYE Dec 2011 2012F 2013F 2014F FYE Dec 2011 2012F 2013F 2014F
Sales 5,190.8 7,306.5 7,350.0 8,340.8 Operating cash flow 1,356.0 2,934.2 1,502.9 2,062.1 Inventories and consumables (1,025.2) (1,231.6) (1,455.3) (1,651.5) Net Profit before minorities 132.0 965.0 898.7 1,097.1 Purchased and contracted (624.9) (757.0) (859.1) (989.1) Depreciation 463.8 507.8 522.0 551.5 servicesStaff cost (2,310.7) (2,793.0) (3,169.5) (3,649.2) &AmortisationChange in Working Capital 386.1 1,714.6 (60.2) 236.5 Rental of premises (263.7) (264.0) (264.0) (264.0) Others 374.1 (253.3) 142.4 177.0 Other op. inc/(exp) (1,095.8) (459.7) (521.7) (589.3) Investment cash flow (2,267.3) (1,409.4) (755.9) (624.4) EBITDA 1,094.0 1,561.4 1,621.0 1,875.0 Net Capex (845.0) (1,593.7) (922.1) (826.1) Dep&amort. (441.6) (507.8) (522.0) (551.5) Net Investments (1,472.7) 0.0 0.0 0.0 Operating Profit 652.4 1,053.6 1,099.0 1,323.5 Change in other assets 50.4 184.3 166.2 201.7 Net Interest (526.5) (47.6) (38.0) (12.1) Financing cash flow 1,324.3 58.6 (88.2) 26.6 Interest Income 58.3 134.9 110.4 142.3 Change in share capital 7,265.9 5,040.0 0.0 0.0 Interest Expense (584.8) (182.5) (148.4) (154.4) Dividends paid (5.1) 0.0 0.0 0.0 Net Investment income/(loss) 0.0 0.0 0.0 0.0 Net change in debt (5,107.3) (4,799.0) 60.2 181.0 Net other non-op. JV+Assc. 93.8 69.7 76.4 80.8 Change in other LT liab. (829.2) (182.5) (148.4) (154.4) Net exceptionals 0.0 112.4 0.0 0.0 Net cash flow 413.0 1,583.3 658.8 1,464.3 Pretax profit 219.8 1,188.1 1,137.4 1,392.2 Free cash flow 511.0 1,340.5 580.8 1,236.0 Income taxes (87.8) (223.2) (238.7) (295.1) Minority Interest 113.6 (162.3) (235.7) (285.3) Net Profit 245.7 802.7 663.0 811.9 KEY RATIOS Recurring Net Profit 245.7 498.5 663.0 811.9 FYE Dec 2011 2012F 2013F 2014F
EPS (sen) 3.0 10.0 8.2 10.1 Growth (% YoY) Recurring EPS (sen) 3.0 6.2 8.2 10.1 Sales 15.2 40.8 0.6 13.5 EBIT 79.5 61.5 4.3 20.4 EBITDA 33.8 42.7 3.8 15.7 BALANCE SHEET (MYR m) Pro-forma Net profit 218.5 630.8 (6.9) 22.1 FYE Dec 2011 2012F 2013F 2014F EPS 212.1 226.7 (17.4) 22.5
Total Assets 23,020.3 24,925.9 26,139.2 28,128.6 Profitability (%) Current Assets 3,892.5 4,590.2 5,326.9 6,961.0 Gross Margin 69.1 75.1 69.9 69.9 Cash & ST investment 1,768.2 3,351.6 4,010.3 5,474.6 EBITDA Margin 21.1 21.4 22.1 22.5 Inventories 117.9 140.1 151.5 172.0 EBIT Margin 12.6 14.4 15.0 15.9 Accounts receivable 814.2 1,040.9 1,107.5 1,256.8 Net Margin 4.7 11.0 9.0 9.7 Others 1,192.2 57.5 57.5 57.5 ROA 1.3 3.3 2.6 3.0 Non-current Assets 19,127.9 20,335.7 20,812.3 21,167.7 ROE 2.6 4.8 3.7 4.3 LT investments 1,458.8 1,551.5 1,627.9 1,708.7 Net PPE 6,044.2 7,201.8 7,673.9 8,020.5 Stability Others 11,624.9 11,582.5 11,510.5 11,438.5 Total Debt/Equity (X) 0.2 0.2 0.2 0.2 Net Debt/Equity (X) 0.1 net cash net cash net cash Total Liabilities 6,123.7 6,931.9 7,010.7 7,617.8 Int. coverage (X) 1.1 5.8 7.4 8.6 Current Liabilities 2,428.9 3,355.0 3,386.7 3,819.3 Int. & ST debt coverage 0.8 2.4 2.6 3.0 Accounts payable 2,019.2 2,922.6 2,940.0 3,336.3 (X)Cashflow int. coverage (X) 2.3 16.1 10.1 13.4 ST borrowings 246.6 259.0 272.5 289.0 Cashflow int. & ST debt (x) 1.6 6.6 3.6 4.7 Others 163.0 173.4 174.2 194.0 Current Ratio (X) 1.6 1.4 1.6 1.8 Long-term liabilities 3,694.9 3,576.9 3,624.0 3,798.4 Quick Ratio (X) 1.6 1.3 1.5 1.8 Long-term debts 2,797.3 2,678.6 2,725.2 2,889.8 Net debt/(cash) (MYR m) 1,275.7 (414.0) (1,012.6) (2,295.9) Others 897.6 898.3 898.7 908.6 Per share data (sen) Shareholder's equity 16,304.6 17,269.5 18,168.2 19,265.4 EPS 3.0 10.0 8.2 10.1 Paid-in capital 16,029.0 16,029.0 16,029.0 16,029.0 Recurring EPS 3.0 6.2 8.2 10.1 Reserve 275.6 1,240.6 2,139.3 3,236.4 CFPS 16.8 36.4 18.7 25.6 Minority Interest 592.1 724.5 960.2 1,245.5 BVPS 202.4 214.3 225.5 239.1 Total Equity 16,896.6 17,994.0 19,128.5 20,510.8 SPS 64.4 90.7 91.2 103.5 Total Equity & Liabilities 23,020.3 24,925.9 26,139.2 28,128.6 EBITDA/Share 13.6 19.4 20.1 23.3 DPS 0.0 0.0 0.0 0.0
Source: IPO Prospectus, Maybank KE estimates
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Appendix I: Key management profiles
Figure 37: Director's profiles Name Board Position Age Background Tan Sri Dato' Dr Abu Bakar Chairman of IHH, 68 He has c.19 years of healthcare industry experience. He was a consultant Suleiman President and CEO of nephrologist and head of the Department of Nephrology at Hospital Kuala IMU Lumpur. He developed the nephorology and dialysis services at Hospital Kuala Lumpur and in other hospitals around Malaysia. In 1987, he joined MOH Malaysia as the Director of Medical Services. In 1989, he was the Deputy Director General of Health and in 1991, he was appointed as the Director General of Health. He was appointed President of IMU in 2001. He holds an MBBS from Monash University and obtained a Masters of Medicine (Internal Medicine) from the University of Singapore. He attended the Advanced Management Programme at Harvard Business School in 1991. Dr Lim Cheok Peng Managing Director of IHH 65 He has c.25 years of healthcare industry experience, as a medical and Vice Chairman of practitioner and in managing hospital businesses. He spearheaded the PPL redevelopment of Gleneagles Hospital in Kuala Lumpur, Gleneagles Hospital in Jakarta, Gleneagles Hospital in Medan and Gleneagles Hospital in Kolkata. In 1987, he began his career in Parkway as CEO, became MD in 2000 and Vice Chairman in 2009. In 2011, he joined IHH as Executive Director. He holds an MBBS and Masters of Medicine (Internal Medicine) from the University of Singapore. He is also a Fellow of the Royal College of Physicians of the United Kingdom and later became a Fellow of the Royal College of Physicians and Surgeons of Glasgow and Edinburgh.
Dr Tan See Leng Executive Director of IHH 47 He has c.20 years of healthcare industry experience. In 2004, he joined and Managing Director Parkway as COO of Mount Elizabeth Hospital and was subsequently and Group CEO of PPL appointed Senior Vice President, International Operations in 2006, and later seconded to Pantai as CEO of the Hospitals Division. In 2010, he was appointed MD and CEO of Parkway and was concurrently appointed MD of Parkway Pantai in 2011. He holds an MBBS and Master of Medicine (Family Medicine) from the National University of Singapore. He also has a Master of Business Administration from the University of Chicago - Booth School of Business. Ahmad Shahizam Md Shariff Director of IHH, Head of 41 He began his career with HSBC, Kuala Lumpur in 1994 and joined ING Business Development & Barings Bank in Kuala Lumpur in 1996. Subsequently, he joined Citigroup, Investor Relations of IHH Salmon Smith Barney as Vice President of Equity Research. In 2004, he and Executive Director of joined Khazanah in the MD's office and eventually held the position of Corporate Service of PPL Director of Investments responsible for all investments in the healthcare and power sectors, including company monitoring and engagement as well as leading value creation plans and related transactions. He was appointed Executive Director of PPL in 2010. He holds a Bachelor of Laws (Hons) from the London School of Economics and Political Science, University of London and obtained a Masters in Public Administration from Harvard University, U.S. Mehmet Ali Aydinlar Executive Director of IHH, 55 He has c.20 years of healthcare industry experience. He started his career Chairman and CEO of in 1981 as a Public Accountant. As an entrepreneur with extensive Acibadem Holding management experience, he has been involved in the healthcare sector with Acibadem Group since 1993. He holds a business administration degree from Galatasaray Economy and Management Business College and an honorary doctorate degree from Dumplupinar University, Institute of Social Sciences. Dr Lim Suet Wun Executive Vice President 52 He has c.25 years of healthcare industry experience. He began his career of Singapore Operations, as a house officer in the MOH Singapore and subsequently became a of Parkway Healthcare Medical Officer in the Singapore Armed Forces. In 1991, he was appointed COO of KK Women and Children's Hospital and in 1995 became the CEO of National University Hospital. In 2001, he joined Tan Tock Seng Hospital as CEO and in 2004 became the CEO of the National Healthcare Group Singapore. He was appointed Head of Singapore Operations Division of Parkway Pantai in 2011. He holds an MBBS from the National University of Singapore and Master of Public Health and Master of Business Administration degrees from the University of California, U.S.
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Name Board Position Age Background Tan See Haw Group CFO of PPL 55 Joined Parkway in 2009. Upon Parkway's acquisition by Parkway Pantai in 2011, he was appointed Group CFO of PPL. Prior to his appointment with PPL, he was the VP of IT and Supply Chain of Unisem (M) Bhd from 2007- 2008. He has held key regional positions in major corporations such as Advanced Interconnect Technologies, Asia Pacific Breweries Ltd and Pepsi- Cola International. He holds a Bachelor of Accountancy from the National University of Singapore. He is also a Fellow of Institute of the Certified Public Accountants of Singapore.
Murat Yalcin Nak Deputy General Manager 47 He has c.7 years of healthcare industry experience. Before joining of Acibadem (Regional Acibadem in 2008, he worked in Procter & Gamble Turkey (as Planning Operations and Engineer), Procter & Gamble Germany (as Assistant Brand Manager and Marketing) Planning Group Manager), McKinsey & Co. in Turkey and Switzerland (as Senior Engagement Manager) and PwC (as consultant). His final post before joining Acibadem, was serving from 2005-2008 as the CEO and Board Member of Memorial Healthcare in Turkey. He holds a Masters in Business Administration from Northwestern University's J. L. Kellogg School of Management, U.S. Rengin Yigitbas Akillioglu Deputy General Manager, 47 She began her career at NASAS Aluminium Inc. in Istanbul, Turkey in 1987 CFO and Board and worked with Turkish Airlines Inc. (THY) during 1989-2010 in various Secretary of Acibadem positions in management and finance, the last being CFO of THY. She has been working as CFO, Coordinator USA and the board secretary at Acibadem since 2010. She holds a B.Sc. in Management Engineering from Istanbul Technical University and a Master's Degree in Economics from Bogazici (Bosphorus) University, Turkey. Source: IPO Prospectus
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Appendix II: Hospital Assets, Networks and Key Operating Data
Figure 38: IHH's existing hospital network Hospital Country Accreditation Specialist areas Licensed Operating beds theatres 1 Mount Elizabeth Hospital Singapore JCI Cardiothoracic vascular surgery, 345 13 neurosurgery, general surgery kidney transplantation, hematopoietic stem cell, transplantation, orthopedics, cardiology, oncology
2 Gleneagles Hospital Singapore JCI Cardiology, gastroenterology, liver 272 12 transplantation, obstetrics & gynaecology, oncology, orthopedics 3 Parkway East Hospital Singapore JCI General surgery, paediatrics, obstetrics 113 5 & gynaecology, cardiology, fertility services (including IVF) 4 Pantai Hospital Kuala Lumpur Malaysia JCI, MSQH Cardiology and cardiothoracic surgery, 332 8 orthopaedic, oncology, minimally invasive surgery, obstetrics and gynaecology, paediatric, trauma and 22 other specialties
5 Gleneagles Hospital Kuala Malaysia JCI, MSQH Cardiology and cardiothoracic surgery, 316 8 Lumpur neurosurgery, obstetrics and gynaecology, plastic surgery, reconstructive and maxillofacial, orthopaedic, trauma surgery and 17 other specialties
6 Gleneagles Medical Center Malaysia MSQH Cardiology and cardiothoracic surgery, 227 5 Penang oncology, hand and microsurgery, haematology, neurosurgery, nephrology, orthopaedic, urology and 18 other specialties
7 Pantai Hospital Ayer Keroh Malaysia MSQH Cardiology and cardiothoracic surgery, 224 7 oncology, nephrology, obstetrics and gynaecology, paediatrics, ophthalmology and 16 other specialties
8 Pantai Hospital Penang Malaysia MSQH ENT, neurology, neurosurgery, 195 5 orthopaedic, cardiology and 15 other specialties 9 Pantai Hospital Ipoh Malaysia - Cardiology and cardiothoracic surgery, 180 4 orthopaedic and ophthalmology, haematology, obstetrics and gynaecology, paediatrics and 14 other specialties
10 Pantai Hospital Cheras Malaysia MSQH ENT, general medicine, general 143 4 surgery, obstetrics and gynaecology, orthopaedic and 12 other specialties 11 Pantai Hospital Ampang Malaysia - ENT, general medicine, general 114 4 surgery, obstetrics and gynaecology, orthopaedic and 10 other specialties 12 Pantai Hospital Klang Malaysia MSQH General medicine, general surgery, 108 3 obstetrics and gynaecology, orthopaedic, paediatric and 11 other specialties
13 Pantai Hospital BatuPahat Malaysia - General medicine, general surgery, 106 3 obstetrics and gynaecology, orthopaedic, paediatric and 5 other specialties
14 Pantai Hospital Sungai Petani Malaysia - General medicine, cardiology, general 80 2 surgery, obstetrics and gynaecology, orthopaedic and 8 other specialties
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Hospital Country Accreditation Specialist areas Licensed Operating beds theatres 15 Acibadem Bursa Hospital Turkey - 25 therapeutic areas and key specialist 195 6 services (including radiation oncology, cardiovascular surgery, general surgery, obstetrics and gynaecology
16 AcibademMaslak Hospital Turkey JCI 30 therapeutic areas and key specialist 183 8 services (including radiation oncology, cardiac care and urology) 17 AcibademBakirkoy Hospital Turkey JCI 25 therapeutic areas and key specialist 136 7 services (including paediatric cardiovascular surgery, orthopaedic and general surgery)
18 AcibademKadikoy Hospital Turkey JCI 25 therapeutic areas and key specialist 127 6 services (including IVF, cardiology, paediatrics and internal medicine) 19 Acibadem Adana Hospital Turkey JCI 25 therapeutic areas and key specialist 125 5 services (including radiation oncology) 20 Acibadem Kayseri Hospital Turkey - 20 therapeutic areas and key specialist 119 6 services (including radiation oncology) 21 International Hospital Turkey JCI 25 therapeutic areas and key specialist 118 6 services (including organ transplantation and paediatric cardiovascular surgery) 22 Acibadem Eskisehir Hospital Turkey - 20 therapeutic ares and key specialist 109 5 services 23 Aile Hospital Bahcelievler Turkey - 25 therapeutic areas and key specialist 109 5 services (including general surgery, orthopaedic, obstetrics and gynaecology)
24 AcibademFulya Hospital Turkey Pending JCI 10 therapeutic areas and key specialist 100 6 services (including sports medicine) 25 Aile Hospital Goztepe Turkey - 20 therapeutic areas and key specialist 89 4 services (including general surgery, cardiology and cardiovascular surgery) 26 AcibademKozyatagi Hospital Turkey - 25 therapeutic areas and key specialist 87 4 services, including adult and paediatric neurosurgery, medical oncology, nuclear medicine
27 AcibademKocaeli Hospital Turkey JCI 25 therapeutic areas and key specialist 75 3 services (including paediatrics, internal medicine, ENT and cardiovascular surgery)
28 AcibademSistina Skopje Macedonia Preparing for Cardiology, cardiovascular surgery, 179 8 Clinical Hospital JCI urology, obstetrics and gynaecology 29 Apollo Gleneagles Hospital India JCI Cardiology, general surgery, 425 - (50:50 JV with Apollo) orthopaedic and transplants 30 Gleneagles JPMC Cardiac Brunei - Cardiac inpatient and outpatient 21 2 Centre (75:25 JV with Brunei specialist services Investment Agency) Total 4,952 164 Source: IPO Prospectus
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Figure 39: Key operating statistics 2009 2010 2011 1Q12 Singapore No. of hospitals 3 3 3 3 No. of licensed beds 1,008 743 730 730 No. of operational beds 724 714 716 719 Inpatient admissions 46,961 49,182 51,036 13,261 Avg length of stay 3.4 3.3 3.3 3.3 Occupancy 60.0% 62.0% 64.0% 67.0% Avg revenue per patient day (SGD) 1,962 2,091 2,275 2,437 Avg revenue per patient day (MYR) 4,709 5,018 5,460 5,849
Malaysia (Hub and Spoke) No. of hospitals 11 11 11 11 No. of licensed beds 1,993 1,993 2,010 2,025 No. of operational beds 1,781 1,835 1,878 1,911 Inpatient admissions 146,200 152,286 154,823 40,443 Avg length of stay 2.8 2.8 2.8 2.7 Occupancy 64.2% 65.1% 63.0% 63.5% Avg revenue per patient day (SGD) 482 542 583 609 Avg revenue per patient day (MYR) 1,156 1,301 1,399 1,461
Malaysia (Hub) No. of hospitals 6 6 6 6 No. of licensed beds 1,459 1,459 1,459 1,474 No. of operational beds 1,312 1,346 1,359 1,392 Inpatient admissions 108,425 109,743 111,175 28,458 Avg length of stay 3.0 3.0 3.0 2.9 Occupancy 66.4% 68.0% 66.7% 65.6% Avg revenue per patient day (SGD) 492 562 600 633 Avg revenue per patient day (MYR) 1,181 1,348 1,439 1,520
Malaysia (Spoke) No. of hospitals 5 5 5 5 No. of licensed beds 534 534 551 551 No. of operational beds 469 489 519 519 Inpatient admissions 37,775 42,543 43,648 11,985 Avg length of stay 2.4 2.4 2.3 2.3 Occupancy 58.0% 57.3% 53.4% 58.0% Avg revenue per patient day (SGD) 446 479 528 535 Avg revenue per patient day (MYR) 1,071 1,149 1,267 1,283
Turkey No. of hospitals 9 11 14 14 No. of licensed beds 1,232 1,473 1,751 1,801 No. of operational beds 1,232 1,473 1,751 1,801 Inpatient admissions 52,869 66,428 88,525 27,872 Avg length of stay 3.2 3.5 3.5 3.3 Occupancy 54.9% 66.5% 79.5% 78.1% Avg revenue per patient day (SGD) 1,085 1,136 1,133 1,258 Avg revenue per patient day (MYR) 2,602 2,724 2,718 3,017
IMU Total programmes offered 14 15 17 18 Total student enrolment 2,631 2,928 2,963 3,179 Source: IPO Prospectus
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RESEARCH OFFICES REGIONAL ECONOMICS P K BASU Suhaimi ILIAS Regional Head, Research & Economics Chief Economist (65) 6432 1821 [email protected] . Singapore | Malaysia (603) 2297 8682 [email protected] WONG Chew Hann, CA Acting Regional Head of Institutional Research Luz LORENZO (603) 2297 8686 [email protected] Economist
THAM Mun Hon, CFA . Philippines | Indonesia (63) 2 849 8836 [email protected] Regional Strategist (852) 2268 0630 [email protected]
ONG Seng Yeow Regional Products & Planning (852) 2268 0644 [email protected]
MALAYSIA SINGAPORE THAILAND WONG Chew Hann, CA Head of Research Stephanie WONG Head of Research Mayuree CHOWVIKRAN Head of Research (603) 2297 8686 [email protected] (65) 6432 1451 [email protected] (66) 2658 6300 ext 1440 [email protected] . Strategy . Strategy . Strategy . Construction & Infrastructure . Small & Mid Caps Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Desmond CH’NG, ACA Gregory YAP Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (603) 2297 8680 [email protected] (65) 6432 1450 [email protected] [email protected] . Banking - Regional . Technology & Manufacturing . Consumer/ Big Caps LIAW Thong Jung . Telcos - Regional (603) 2297 8688 [email protected] Wilson LIEW Andrew STOTZ Strategist . Oil & Gas (65) 6432 1454 [email protected] (66) 2658 6300 ext 5091 [email protected] . Automotive . Hotel & Resort . Shipping . Property & Construction Suttatip PEERASUB ONG Chee Ting, CA James KOH (66) 2658 6300 ext 1430 [email protected] (603) 2297 8678 [email protected] (65) 6432 1431 [email protected] . Media . Plantations . Logistics . Commerce Mohshin AZIZ . Resources Sutthichai KUMWORACHAI (603) 2297 8692 [email protected] . Consumer (66) 2658 6300 ext 1400 [email protected] . Aviation . Small & Mid Caps . Energy . Petrochem YEAK Chee Keong, CFA . Petrochem . Power (65) 6433 5730 [email protected] Termporn TANTIVIVAT YIN Shao Yang, CPA . Healthcare (66) 2658 6300 ext 1520 [email protected] (603) 2297 8916 [email protected] . Offshore & Marine . Property . Gaming – Regional Alison FOK Woraphon WIROONSRI . Media (65) 6433 5745 [email protected] (66) 2658 6300 ext 1560 [email protected] . Power . Services . Banking & Finance TAN CHI WEI, CFA . S-chips Jaroonpan WATTANAWONG (603) 2297 8690 [email protected] Bernard CHIN (66) 2658 6300 ext 1404 [email protected] . Construction & Infrastructure (65) 6433 5726 [email protected] . Transportation . Power . Transport (Land, Shipping & Aviation) . Small cap. WONG Wei Sum, CFA ONG Kian Lin Chatchai JINDARAT (603) 2297 8679 [email protected] (65) 6432 1470 [email protected] (66) 2658 6300 ext 1401 [email protected] . Property & REITs . REITs / Property . Electronics LEE Yen Ling Wei Bin Pongrat RATANATAVANANANDA (603) 2297 8691 [email protected] (65) 6432 1455 [email protected] (66) 2658 6300 ext 1398 [email protected] . Building Materials . S-chips . Services/ Small Caps . Manufacturing . Small & Mid Caps
. Technology INDONESIA VIETNAM LEE Cheng Hooi Head of Retail Katarina SETIAWAN Head of Research Michael KOKALARI,CFA Head of Research [email protected] (62) 21 2557 1125 [email protected] (84) 838 38 66 47 [email protected] . Technicals . Consumer . Strategy
HONG KONG / CHINA . Strategy Nguyen Thi Ngan Tuyen Edward FUNG Head of Research . Telcos (84) 844 55 58 88 x 8081 [email protected] (852) 2268 0632 [email protected] Lucky ARIESANDI, CFA . Food and Beverage . Construction (62) 21 2557 1127 [email protected] § Oil and Gas . Base metals Ngo Bich Van Ivan CHEUNG (852) 2268 0634 [email protected] . Coal (84) 844 55 58 88 x 8084 [email protected] . Property . Oil & Gas . Banking . Industrial Rahmi MARINA Trinh Thi Ngoc Diep Ivan LI (62) 21 2557 1128 [email protected] (84) 844 55 58 88 x 8242 [email protected] (852) 2268 0641 [email protected] . Banking . Technololy . Banking & Finance . Multifinance . Utilities Jacqueline KO Pandu ANUGRAH . Construction (852) 2268 0633 [email protected] (62) 21 2557 1137 [email protected] Dang Thi Kim Thoa . Consumer Staples . Auto (84) 844 55 58 88 x 8083 [email protected] Andy POON . Heavy equipment . Consumer (852) 2268 0645 [email protected] . Plantation Nguyen Trung Hoa . Telecom & equipment . Toll road +84 844 55 58 88 x 8088 [email protected] Alex YEUNG Adi N. WICAKSONO . Steel (852) 2268 0636 [email protected] (62) 21 2557 1130 [email protected] . Sugar . Industrial . Generalist . Resources Anthony YUNUS INDIA (62) 21 2557 1134 [email protected] Jigar SHAH Head of Research . Cement (91) 22 6623 2601 [email protected] . Infrastructure . Oil & Gas . Property . Automobile Arwani PRANADJAYA . Cement (62) 21 2557 1129 [email protected] Anubhav GUPTA . Technicals (91) 22 6623 2605 [email protected] . Metal & Mining PHILIPPINES . Capital goods Luz LORENZO Head of Research . Property (63) 2 849 8836 [email protected] . Strategy Ganesh RAM (91) 226623 2607 [email protected] Laura DY-LIACCO . Telecom (63) 2 849 8840 [email protected] . Contractor . Utilities . Conglomerates . Telcos Lovell SARREAL (63) 2 849 8841 [email protected] . Consumer . Media . Cement Kenneth NERECINA (63) 2 849 8839 [email protected] . Conglomerates . Property . Ports/ Logistics Katherine TAN (63) 2 849 8843 [email protected] . Banks . Construction Ramon ADVIENTO (63) 2 849 8842 [email protected] . Mining
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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. 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MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, p erform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This rep ort is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the pri or written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. 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UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
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DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission.Philippines: ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (“KEVS”) (License Number: 71/UBCK-GP) is licensed under the StateSecuritiesCommission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 16 October 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. As of 16 October 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 m onths, significant advice or investment services in relation to the investment concerned or a related investment.
OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings Maybank Kim Eng Research uses the following rating system: BUY Total return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Total return is expected to be between -10% to +10% in the next 12 months (excluding dividends) SELL Total return is expected to be below -10% in the next 12 months (excluding dividends) Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax
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Malaysia Singapore London New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd USA Inc Bursa Malaysia Securities Berhad) 9 Temasek Boulevard 6/F, 20 St. Dunstan’s Hill 777 Third Avenue, 21st Floor 33rd Floor, Menara Maybank, #39-00 Suntec Tower 2 London EC3R 8HY, UK New York, NY 10017, U.S.A. 100 Jalan Tun Perak, Singapore 038989 50050 Kuala Lumpur Tel: (44) 20 7621 9298 Tel: (212) 688 8886 Tel: (603) 2059 1888; Tel: (65) 6336 9090 Dealers’ Tel: (44) 20 7626 2828 Fax: (212) 688 3500 Fax: (603) 2078 4194 Fax: (65) 6339 6003 Fax: (44) 20 7283 6674
Stockbroking Business: Hong Kong Indonesia India Level 8, Tower C, Dataran Maybank, Kim Eng Securities (HK) Ltd PT Kim Eng Securities Kim Eng Securities India Pvt Ltd No.1, Jalan Maarof Level 30, Plaza Bapindo 2nd Floor, The International 16, 59000 Kuala Lumpur Three Pacific Place, Citibank Tower 17th Floor Maharishi Karve Road, Tel: (603) 2297 8888 1 Queen’s Road East, Jl Jend. Sudirman Kav. 54-55 Churchgate Station, Fax: (603) 2282 5136 Hong Kong Jakarta 12190, Indonesia Mumbai City - 400 020, India
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South Asia Sales Trading North Asia Sales Trading Connie TAN Eddie LAU [email protected] [email protected] Tel: (65) 6333 5775 Tel: (852) 2268 0800 US Toll Free: 1 866 406 7447 US Toll Free: 1 866 598 2267 www.maybank-ke.com | www.kimengresearch.com.sg
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