IHH Healthcare MYR6.73 billion (US$2.12 billion) initial public offering (IPO)
Joint global coordinators: Bank of America-Merrill Lynch, CIMB, Deutsche Bank
Joint bookrunners: Credit Suisse, DBS, Goldman Sachs
While most of Asia’s equity markets were deep in the doldrums during most of 2012, Malaysia was one of the few countries to enjoy the opposite. Not just that, the country accounted for some of the most notable listings of the year.
The deals were largely related to government-linked companies, and effectively amounted to privatisations ahead of the country’s election in early 2013. Of all these deals we think that IHH Healthcare’s IPO was the most impressive.
The company is owned by the Malaysian government’s investment arm Khazanah Nasional and operates hospitals and clinics in Malaysia, China, Singapore, Hong Kong, India and Turkey. It is Asia’s largest hospital operator, which is an enviable sector to be strong in. The rapid growth of the middle class in Malaysia and Southeast Asian emerging markets is leading to a great deal more being spent on quality health care.
All of this meant that investors were very interested to get exposure to the company. A broad array of cornerstone investors flocked to the deal despite concern of foreign-exchange risk on IHH’s Turkey operations and the fact that its Singapore hospital is not operating yet.
This, along with an institutional investor tranche that ended up 130 times oversubscribed, ensured that IHH was able to price its shares at MYR2.80, near the top end of the range of the MYR2.67-MYR2.85 guidance. At that valuation the company was valued at 33 times next year’s expected earnings, representing a 52% premium over comparable deals.
The IPO itself wasn’t the largest deal done in the region last year, or even in Malaysia. That accolade belongs to the MYR10.43 billion IPO conducted by Felda Global Ventures Holdings in June. IHH Healthcare’s MYR6.73 billion dual-listing, conducted a month later, was the second-biggest to be done in the region.
But what IHH lacked in size it made up for in execution and secondary market performance. Its shares have continued to rise to MYR3.29 on December 10, more than 15% higher than the initial sale.
In contrast Felda’s stock soared 20% when it began trading, but the rise didn’t last. Its stock slipped downwards afterwards, almost dropping back to its IPO price of MYR4.55.
Other notable transactions during 2012 included Malayan Banking’s US$800 million lower tier two subordinated bond issue, the first subordinated deal from the country in five years that enjoyed the lowest coupon for a lower tier two deal in the region. Plus Kencana Petroleum merged with SappuraCrest Petroleum to create an energy services giant.
But IHH’s IPO is likely to be the deal that investors most fondly recall when they remember 2012 in the years to come.