IHH to grow presence in China with ParkwayHealth
KUCHING: IHH Healthcare Bhd’s (IHH) presence in China is set to grow further with the establishment of a 70 per cent owned Sinoforeign Equity Company named ParkwayHealth Chengdu Hospital Ltd (ParkwayHealth Chengdu), of which the remaining 30 per cent equity stake will be owned by their local partner, Shanghai Broad Ocean Investments Corp Ltd (Shanghai Broad Ocean).
The research arm of HongLeong Investment Bank Bhd ( HLIB Research) opines that this investment and partnership with Shanghai Broad Ocean would be positive to IHH’s long term prospects as it would solidify the group’s presence as an international healthcare provider in Greater China with their first tertiary facility in the Western Region.
IHH recently received the ‘ Business License’ approval from Chengdu Administration of Industry and Commerce for the establishment via its indirect wholly-owned subsidiary, M&P Investments Pte Ltd (M&P); the license will be valid for 20 years commencing December 12, 2016.
ParkwayHealth Chengdu was established with a registered capital of RM192 million of which IHH’s investment via M& P is a cash subscription of RM134.6 million. Its principal activities are the provision of specialised care and services such as obstetrics and gynaecology, paediatrics, orthopaedics, ophthalmology, respiratory, gastroenterology, oncology, cardiology and geriatrics.
The hospital is expected to commence operations by the first half of 2018 (1H18) and will be located on a 48,000 square metre (sqm) within the Perennial International Health and Medical Hub, as last year, M&P along with Shanghai Broad Ocean had entered into an agreement with Perennial Real Estate Holdings Ltd to operate a 350 bed capacity multidisciplinary hospital in that area.
Financially, HLIB Research expects the investment to have little impact to the group in the near term, as the group boasted a total of RM2.0 billion in cash assets at the end of the third quarter of 2016 (3Q16).
IHH’s current gearing is at a comfortable 0.21 fold and the ParkwayHealth Chengdu investment is expected to be less than one per cent of their total cash balance reported the research arm.
Additionally, with the group on course to open 850 beds in Hong Kong by 1H17 and Chengdu by 1H18, its earnings are expected to be boosted in the midterm. However prior to this, HLIB research notes that IHH would likely face higher pre-operating expenses, losses and staff costs during this gestation period.