Khazanah-IHH could help PCMC


The Khazanah Nasional Bhd-IHH Healthcare Bhd link could turn around Prince Court Medical Centre Sdn Bhd’s (PCMC) fortune in the immediate term.

The state-owned sovereign fund announced last week that it was taking over PCMC from the national oil company Petroliam Nasional Bhd (Petronas) for an unspecified amount.

Khazanah, which is a major shareholder in IHH, will use the latter to fast track the improvements at the medical centre, which commenced operation 11 years ago. The sovereign wealth fund owns 40.9% interest in IHH.

Reports have suggested that the PCMC acquisition could cost the sovereign wealth fund as much as RM1.4 billion, with the jewel of the purchase would be the land where the hospital sits.

Talks of Khazanah-IHH taking over PCMC from Petronas have been swirling since February as reported by The Edge Weekly. The state-owned energy company has been disposing of non-core assets and cutting expenditure since oil prices tumbled in 2014. PCMC has been a bane to Petronas’ costs.

RHB Investment Research said instead of an outright acquisition of PCMC, the proposed collaboration by Khazanah is a better option as PCMC has been making losses and any direct acquisition would weigh on IHH’s earnings.

“We expect IHH to charge advisory fees in the interim for the collaboration and would not rule out the possibility that it could eventually acquire PCMC in the future,” it said in a statement last week.

RHB has maintained a ‘Buy’ status of RM7 for IHH, a 16% upside from its price at RM6.02, on the back of its strong regional footprint and long-term earnings growth potential.

Some of the risks foreseen include a delay in new hospital openings, unfavourable currency movements and overpaying for acquisitions in its quest for market access and growth.

Khazanah acquired PCMC via its wholly owned subsidiary, Pulau Memutik Ventures Sdn Bhd (PMV), which has acquired a 100% interest in PCMC. At the same time, IHH announced it had entered into a term sheet collaboration with PMV for shared services support and operational improvement initiatives at PCMC.

IHH has also been given the right of the first offer to acquire PCMC during a pre-agreed period, with the fund agreeing to leverage all expertise and experiences to transform PCMC into becoming a worldclass medical facility.

Khazanah’s takeover of PCMC is expected to be completed by the second quarter of this year.