Ratchaphruek Hospital sets IPO price at Bt4.80

The Khon Kaen-based hospital yesterday announced the finalisation of its IPO price at Bt4.80 apiece. 
Pimpaka Nichgaroon, executive director of Thanachart Securities, financial adviser and lead underwriter, said the pricing was set at 32 times the hospital’s earnings per share, which was appropriate considering that the current price-to-earnings (P/E) ratios of listed mid-sized hospitals was 38-40 times.
“Its profit has risen every year, and when the new building is completed it will grow faster than the sector in 2019 and 2020,” she said.
Because of the dilution effect from the capital increase, RPH’s earnings per share may contract this year. Nevertheless, when it starts to open the new hospital facility in the middle of next year, it should not incur a loss, since it is not a brand-new hospital but a relocation from an old site, Pimpaka said.
RPH is expected to raise Bt786.14 million from selling 163.78 million IPO shares, accounting for 30 per cent of the total outstanding stocks after the capital increase, from today until Friday. The proceeds will be used to finance the relocation of the hospital to a new site that will allow RPH to have a modern and larger facility to accommodate more patients. 
The first phase, to be completed in the second quarter of 2018, will help RPH double its size to 100 beds.
Teerawat said RPH had to refuse more than 2,400 inpatient customers last year because of insufficient beds.
He said the company did not want to finance the project with bank loans because that would have put pressure on its ability to run the hospital business. 
“Through raising funds from the [stock] market, we won’t have much financial pressure and will still be able to keep our pricing from getting too high for middle-level customers,” he said. 
RPH’s debt-to-equity ratio was just 0.27:1 as of the end of last September. 
With a total investment cost of Bt1.4 billion, the new hospital project will be constructed in phases to expand the hospital’s capacity to 202 beds eventually. 
Teerawat said RPH would continue to minimise its price increases to about 4-5 per cent per year, subject to inflation and personnel and other costs.
“We adhere to our professional obligations because we believe that will make us grow solidly and sustainably,” he said.
Pimpaka outlined RPH’s key strengths in four areas: its brand value, market position, quality of management and services, and its size. 
“The expansion from 50 to 200 beds will give RPH the size that will allow it to grow its return on equity and support its growth, without having to pour in more capex [capital expenditure], perhaps for 10 years.
“It should be a good stock,” she said.
Pimpaka said RPH had a clear market positioning as a hospital that stays in the middle between upper-market private hospital groups and public hospitals.
Teerawat told The Nation that RPH’s main challenge was to cope with the competition and it had no intention of sell its hospital to other companies. RPH is competing against Bangkok Hospital Group, which entered the Khon Kaen market two years ago through acquiring an existing hospital in the province, and Khon Kaen Ram Hospital, also part of a big hospital chain.
“If we would give out [our shares], we would have given since a long time. We were approached first,” He said the Bangkok Hospital Group had previously offered to buy RPH.
RPH is scheduled to make its debut on the Stock Exchange of Thailand on February 27. Bualuang Securities and KT ZMICO Securities are co underwriters.