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Singhe Hospitals in Rs.250mn IPO to retire debt, invest in machinery, labs

4 March 2015 04:13 am - 0     - {{hitsCtrl.values.hits}}

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By Chandeepa Wettasinghe
Singhe Hospitals Limited of Ratnapura will be opening its Initial Public Offering of Rs. 250 million on March 12 at the Colombo Stock Exchange, following just 2 years of operations, as announced at a press conference recently.

“This is similar to an older issue we managed, Nawaloka Hospitals. The same steps are also being taken for this hospital,” Merchant Bank of Sri Lanka & Finance (MBSL) PLC Corporate Advisory Deputy General Manager A. M. A. Cader said. He said that Singhe Hospitals is at the right juncture to opt for an IPO and enter the Diri Savi Board with an eventual intention of entering the Main Board.MBSL will be acting as the Registrar and Manager of the IPO which is structured as 100 million ordinary shares valued at Rs. 2.50 each, representing 25.11 percent of the shares in Singhe Hospitals.

Auditors B.R. de Silva & Co., in an independent report said that the market value per share was Rs. 2.59 based on the free cash flow method, and Rs. 1.73 based on the price to book value method.Cader said that 45 percent of the shares will be allocated to retail buyers.Cader further said that Rs.170 million of the raised funds will be utilized to settle existing debts, while Rs. 80 million will be used to purchase new machinery, setting up new micro labs, an eye surgical unit, a new car park and expanding the pharmacy.

The balance sheet of the hospital company as at December 2014, the company’s total interest bearing borrowings (both l ong term and short term) were Rs. 247.17 million, down from Rs.298.03 million year-on-year (yoy).The prospectus states that if the IPO funds prove inadequate, further borrowings will be made by the company.The company’s assets were valued at Rs.703.89 million, increasing from Rs.639.78 million yoy, while net assets per share was Rs.0.98.

Singhe Hospitals had made a net loss of Rs. 53.54 million for the 9 months ending in December, down from a net loss of Rs 93.11 million yoy.“The company will generate a net profit of Rs. 10.3 million for year 2016 and the net asset value per share will increase to Rs.1.36,” the prospectus said.A turnover of Rs. 172.1 million was recorded, up from Rs.118.05 million yoy, while gross profits increased to Rs.96.29 million from Rs. 68.17 million yoy.
Financial costs had dropped to Rs.24.11 million from Rs. 40.79 million yoy.

Singhe Hospitals is expecting to make a turnover of over Rs.220 for the current financial year, helped by around 15,000-20,000 in and outpatients a month, which is one of the two main reasons for subscribing in t he shares according to the management.“Singhe Hospitals Ratnapura has been rewarded for its professional service on par with world class standards at affordable prices,” Singhe Hospitals Director Lakshika Weerasinghe said.

Cader further added that the Board of Investments tax-holidays the company is currently enjoying are the second reason.The prospectus stated that the company’s 5-year BOI status is set to expire in 2017.Singhe Hospitals Chairman/CEO A.M. Weerasinghe currently owns 99.71 percent of the shares, which will be reduced to 74.67 percent following the IPO.
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