Thursday 28 Mar 2024
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KUALA LUMPUR (March 23): IHH Healthcare Bhd's agreement to collaborate with Khazanah Nasional Bhd to improve operational activities for Prince Court Medical Centre (PCMC) is seen as a better move by some analysts, instead of an outright acquisition.

To RHB Investment Bank Bhd analyst Michelle Foong, an outright acquisition of PCMC by IHH would weigh on the latter's earnings as PCMC has been loss-making.

"We are of the view that IHH's collaboration with Khazanah to turn around PCMC — instead of an outright acquisition — is positive for the company in the immediate term. This is so as PCMC, based on five-year financial data submitted to the Companies Commission of Malaysia, has been loss-making.

"The asset would have weighed down on IHH's earnings in the near to mid-term, if it had been directly acquired," she said.

However, Foong does not discount the possibility of IHH acquiring the hospital from Khazanah in the future.

On the other hand, Hong Leong Investment Bank Bhd analyst Sheikh Abdullah said IHH has the financial strength to acquire PCMC, based on its net gearing of 0.03 times and a cash balance of RM6.1 billion as at FY17, assuming the group exercises its right of first offer within the agreed time frame.

At this juncture, the research house is neutral on the news as the acquisition is to be done by Khazanah and so it does not expect any material impact to IHH's earnings or gearing.

“It is understood that Khazanah aims to make PCMC one of the top destinations for medical tourism in the region," Sheikh noted.

Khazanah announced yesterday it was buying over PCMC from Petronas's wholly-owned unit, Petronas Hartabina Sdn Bhd, at a price to be fixed by June this year.

Concurrent with the signing of a share sale and purchase agreement for the buy, Khazanah inked a term sheet for a collaboration agreement with IHH, its dual-listed healthcare unit, to improve PCMC's operations.

Under the agreement, IHH will be given a right of first offer to acquire PCMC during a pre-agreed period.

Khazanah managing director Tan Sri Azman Mokhtar said Khazanah aims to elevate PCMC into "a leading hospital that delivers world-class healthcare for medical tourists".

At 2.30pm, IHH rose 2 sen or 0.33% to RM6.04, giving a market capitalisation of RM49.77 billion.

 

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