After A 40% Fall Since Its Listing, Is International Healthway Corporation Ltd Finally Cheap Enough To Be A Bargain?

International Healthway Corporation Ltd (SGX: 5WA) got listed in Singapore’s stock market by way of a spin-off from Healthway Medical Corp Ltd (SGX: 5NG) back in 2013.

Unfortunately for International Healthway, the experience of being an independent entity hasn’t been too enjoyable so far given that its shares have fallen by nearly 40% from S$0.48 at the spin-off to some S$0.29 today.

Having clocked such a big decline over the past two years, it’s perhaps natural to ask: Has this company become a bargain?

The business of International Healthway

International Healthway’s focus is on the provision of healthcare services (like primary healthcare and preventive care) as well as the ownership and management of healthcare-related assets like nursing facilities and maternity homes. The company currently has operating businesses and development projects in China, Japan, Australia, and Malaysia.

A bargain? Or not

The company has plans to become an integrated medical healthcare provider and is also exploring the possibility of spinning off some of its healthcare-assets into a real estate investment trust that will be listed in Singapore.

Given the company’s REIT-related ambitions, it would thus seem fair to compare the firm with other healthcare REITs like Parkway Life REIT (SGX: C2PU) and First Real Estate Investment Trust  (SGX: AW9U). That’s also where it’s apparent that International Healthway still has an expensive valuation despite that long fall in price since 2013.

At their current prices, Parkway Life and First REIT are both valued at 1.4 times their respective net tangible assets. With International Healthway though, we have a price-to-tangible-book ratio of some 3.1.

A high valuation is also not the only thing which might concern prospective investors. International Healthway’s balance sheet is not the healthiest; as of 31 March 2015, it has a worryingly high net-debt to equity ratio (where net-debt refers to total debt minus total cash) of 138%. In addition, the company had made losses in 2014 if one-off gains were adjusted for.

A Foolish take

Given what we’ve seen with International Healthway – its high valuation; large debt-load; and lack of profitability – there’s a chance that the firm may not be a bargain even after the near-40% fall in price its shares have suffered.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any companies mentioned above.