Asia’s largest hospital operator IHH Healthcare Bhd jumped as much as 14 percent at its trading debut today, as investors eager for exposure to the region’s growing healthcare sector chased the world’s third largest listing this year.

IHH raised US$2.1 billion in a share sale that confirmed Malaysia’s status as Asia’s current IPO capital following the strong debut last month of plantation giant Felda Global Ventures Holdings, the world’s biggest IPO of 2012 after Facebook.

NONE The stock climbed as high as RM3.19 on the Malaysian stock exchange, 13.9 percent above its IPO price of 2.80 ringgit, within the expectations of analysts who had predicted a bounce despite a backdrop of tottering global equity markets and pulled listings.

Its Singapore debut also saw a 9.6 percent jump, adding some shine to the regional bourse after India’s Reliance Communications shelved a planned US$1 billion IPO by its undersea cable unit on jittery market conditions.

“IHH’s premium may be less than Felda Global’s but its prospects over a three to five year holding period would definitely be better,” said Linda Koh, a Kuala Lumpur-based analyst with

research house InsiderAsia.    

Malaysian IHH shares ended the day 10.4 percent higher at RM3.09 per share, while shares in Singapore closed 10.5 percent richer to S$1.23.

    

Malaysia, where the government has a heavy hand in the economy and the equity market is dominated by local investors and large domestic pension funds, has defied a gloomy trend that has seen several IPOs pulled due to a lack of investor interest.

IHH is the healthcare arm of Malaysia’s state investor Khazanah Nasional. It joins the likes of Kuala Lumpur-listed KPJ Healthcare Bhd, Singapore’s Raffles Medical Group, Bangkok Dusit Medical Services and India’s Fortis Healthcare as key healthcare stocks.

The stock is set to lead investor exposure into a region where rising incomes and a growing middle class in China, India and South-East Asia are boosting demand for better medical services.

‘Valuations are not cheap’

“Given IHH’s size, I won’t be surprised to see them incorporated as a component of the STI (Straits Times Index), so some funds may be taking positions first,” said Ng Kian Teck, lead analyst at Singapore-based SIAS Research.

“There are not many healthcare players here, especially of IHH’s size, but valuations are not cheap.”

IHH’s IPO consists of 2.23 billion shares with an over-allotment option of up to 170 million shares, putting the total offering at US$2.1 billion.

The institutional component of the offer was oversubscribed by more than 100 times. Despite strong demand, the IPO was priced slightly below the top of a RM2.67-RM2.85 range to “leave something on the table”, one source involved in the deal said.

Nearly two-thirds of the shares were taken by big “cornerstone” investors including sovereign wealth fund Kuwait Investment Authority and International Finance Corp, the private investment arm of the World Bank.

At RM2.80 a share, IHH would have a market capitalisation of RM22.5 billion (US$7.2 billion), making it the world’s second-biggest listed healthcare provider after US hospital operator HCA Holdings Inc.

Bank of America-Merrill Lynch, CIMB and Deutsche Bank are the lead global coordinators for the listing, with Credit Suisse, DBS, Goldman Sachs and Maybank acting as joint bookrunners.

IHH, which counts Japan’s Mitsui & Co and Dubai-based Albraaj Capital as shareholders along with Khazanah, has expanded rapidly over the past few years and now employs 24,000 people in 30 hospitals as well as medical centres and clinics.

It added Turkish hospital group Acibadem AS, Singapore’s Parkway Holdings and India’s Apollo Hospitals Enterprise Ltd to its local holdings Pantai Hospitals and International Medical University.

Analysts’ views are mixed on IHH’s earnings growth outlook, with some saying it could struggle to achieve synergies from its large, complex operations extending from Malaysia and Singapore to Turkey.

In contrast, TA Research said IHH’s strong earnings growth outlook and favourable geographic diversification warrants the IPO price that values it at a 20 percent premium to its peers.

At RM2.80 a share, IHH trades at a historical price-to-earnings ratio (PER) of nearly 60 times, and 46 times forward PER based on Public Investment Bank’s estimate of earnings per share of 6.1 sen for 2013.

- Reuters