What You Need to Know About Asian Healthcare Specialists Limited’s Initial Public Offering

Asian Healthcare Specialists Limited is set to go public next week. Here are 10 things you should know about the latest initial public offering (IPO):

1. Asian Healthcare Specialists (AHS) is made up of five senior and experienced orthopaedic medical specialists operating at four clinics under The Orthopaedic Centre. Together, they provide a wide range of general and sub-specialised orthopaedic, trauma and sports services such as knee and hip replacements, sports medicine and surgery, spine surgery, foot and ankle surgery, and minimally invasive orthopaedic procedures.

2. AHS has an aim to “be a one-stop integrated healthcare provider for all musculoskeletal-related medical care, including post-surgery rehabilitation services such as physiotherapy and ancillary services such as pain management”.

3. It is placing out 46.9 million new shares at S$0.23 apiece for the IPO. There will be no shares offered to the public. AHS is expected to have a market capitalisation of S$66.7 million based on the listing price and post-placement share count of 290 million shares. To give context to the size of AHS once it goes public, HC Surgical Specialists Ltd (SGX: 1B1), a medical services group mainly involved in providing endoscopic procedures, and general surgery services with a focus on colorectal procedures, has a market capitalisation of slightly below S$100 million. HC Surgical has 14 clinics throughout Singapore.

4. AHS is looking to raise net proceeds (excluding S$1.3 million in listing expenses) of around S$9.5 million from the placement. The group plans to use the proceeds for both organic and inorganic business expansions (S$8.5 million), and for working capital purposes (S$1.0 million). As part of its growth strategy, it plans to “incrementally expand business to complement existing range of services in relation to the musculoskeletal group”.

5. For the financial year ended 30 September 2017 (FY2017), AHS generated S$11 million in revenue and S$438,000 in net profit. If the service fees paid to the group’s specialists had been replaced with employment agreements during the time frame, the bottom-line would have increased to S$4.5 million, and the adjusted earnings per share (EPS) would be 1.84 Singapore cents. The specialists have entered into employment agreements with the group since 2 October 2017.

6. As at 30 September 2017, AHS had S$2.1 million in cash and cash equivalents with no debt. It raked in S$1.2 million in cash flow from operations and had a capital expenditure of just S$26,000. AHS can keep its capital expenditure low as it has an asset-light business model; it leases its operating premises and some of its medical equipment.

7. AHS intends to declare an annual dividend of not less than 50% of its earnings as dividends for FY2018 and FY2019.

8. With a post-placement adjusted EPS of 1.54 Singapore cents and at the placement price of S$0.23, the group would be trading at a price-to-earnings ratio of 15.

9. Assuming a) FY2018’s bottom-line is the same as FY2017’s adjusted net profit; b) the dividend payout ratio is 50%; and c) there is no further increase in the share count, the group’s FY2018 dividend yield would be 3.3%, based on the placement price. The dividend yield does not consider the interim dividend of S$800,000 declared and approved by the group’s shareholders early this year.

10. The IPO closes on 18 April 2018 (12:00 pm). Trading of AHS’ shares is expected to commence on 20 April 2018 (9:00 am).

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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 contributor Sudhan P doesn’t own shares in any companies mentioned.