IPO hopeful Healthscope looks expensive according to valuations made by sell-side analysts in pre-marketing notes, but might appeal to overseas investors, fund managers told Data Room.
Healthscope, Australia’s second-biggest private hospital operator, has kicked off an international pitch to test investor interest with IPO managers Credit Suisse, Goldman Sachs and Macquarie sending out confidential research notes on Monday.
Analysts put a $3.6 billion to $4.1 billion price on the company’s equity value, which could trade between 21.4 to 24.8 times forecast 2015 financial year profit, reporting by Data Room has found. An IPO would likely be the largest to hit the ASX this year.
“We think the proposed valuation range is a bit expensive to us. The question mark is whether the multiples are at the top range or bottom range,” said Don Williams, chief investment officer at Platypus.
“I guess the estimate put out by the sell-side people is a discount to Ramsay, but we don’t think the discount is enough to adjust for difference in quality,” he said.
Ramsay Healthcare, Australia’s biggest private hospital operator, is currently trading at 24 times forward PE.
Akshay Chopra, an investment manager with Karara Capital, also said the multiples appeared to be high.
“When you are paying 21-22 times PE for it… it’s not a screaming buy,” said Mr. Chopra. “The problem here is (that) it’s coming out of private equity, so you could always be wary about that being sold from private equity.”
“The premium you are paying in Ramsay is also in relation to the management team and their abilities and skills, so there are some differences.”
Although the private equity vendors – TPG and Carlyle – have not ruled out a trade sale option, an initial public offering would be the more likely route, a source told Data Room.
Mr Chopra said Healthscope could still appeal to overseas investors who would be happy to get exposure to Australia’s healthcare sector.
“Offshore buyers will be interested, and if you look at Asian hospitals they trade at a fairly big premium. Some of the offshore guys might look at that and say, well, Australia looks ok on that basis
