KUALA LUMPUR (July 7): PMCK Bhd, which mainly operates a medical centre in Kedah, is already fairly valued at its listing price of 22 sen per share, says Hong Leong Investment Bank (HLIB).
The fair value is 10 times its forward enterprise valuations, a 25% discount to the sector’s average, the research house said in an unrated note. PMCK is geographically concentrated, operating as a community hospital, and its earnings growth also trails that of larger peers, the house said.
“We opine that the discount is justifiable,” HLIB said.
HLIB's view stood in contrast to Tradeview Research's take on PMCK en route to the Ace Market. Tradeview, which has a target price of 27 sen on PMCK, believed that the company will benefit from recent government initiatives to improve affordability to private healthcare.
The company is scheduled for listing on July 9, after its initial public offering (IPO), priced at 22 sen a piece, raised about RM60 million for PMCK, and another RM7 million for the selling shareholders, managing director Datuk Lee Gaik Cheng and deputy executive chairman Datuk Lim Kim Huat.
All in all, the IPO raised RM67 million, though some portion of its IPO was undersubscribed and had to be reallocated to other categories of investors. PMCK, however, received orders from the public investors, nearly twice the amount of shares available under the tranche.
PMCK’s operations are predominantly located in Kedah, with about 98% of its revenue derived from this single northern state. “This high geographical concentration exposes the group to regional economic and policy fluctuations, natural disasters, and socio-political risks,” HLIB said.
Average annual earnings growth of PMCK, meanwhile, will likely come in at about 3.8% over the next three years, slower than IHH Healthcare Bhd’s (KL:IHH) 9.7% and KPJ Healthcare Bhd’s (KL:KPJ) 9.2%, HLIB noted.
Further, PMCK primarily operates as a community hospital offering secondary care, while IHH Healthcare and KPJ Healthcare provides tertiary care, which has higher entry barriers and greater service complexity, the house added.