Sri Lanka new hospital IPO gets slow response

COLOMBO (EconomyNext) – A new share issue by Singhe Hospitals Ltd., a small Sri Lankan health care provider, to raise 250 million rupees drew applications worth 25.5 million rupees on the opening day March 12.

A stock exchange filing said there were 218 applications for 10.2 million shares.
The company is issuing 100 ordinary voting shares at 2.50 rupees each with the funds to be used to repay loans amounting to 170 million rupees and for capital expenditure of 80 million rupees.

Many initial public offers in the past have been oversubscribed on the opening day itself.

The stock market has entered a downturn in recent weeks owing to rising interest rates and uncertainty about looming parliamentary elections.

One broker, Bartleet Religare Securities, has advised clients not to subscribe to Singhe  Hospitals saying they do not see it coming to profitability until the 2016 financial year.

"We have arrived at a Discounted Cash Flow based target price of 2.00 given the absence of profits and recommend investors not to subscribe," the brokers said in a report.  

"The private healthcare space in Sri Lanka generally has a long payback period, and we feel it could get longer when it comes to outstation hospitals that principally depend on
pharmaceutical and laboratory services for contribution."


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