Two Saudi healthcare firms plan IPOs as demand booms

DUBAI: Two of Saudi Arabia's largest private hospital groups will seek to float their shares on the Kingdom's bourse next year, banking sources aware of the matter said, aiming to capitalize on investor interest in the fast-growing healthcare sector.
Healthcare businesses in the Gulf Arab region are expected to boom in coming years on the back of rising wealth coupled with an increase in so-called lifestyle diseases - five of the six Gulf nations are in the global top 10 for prevalence of diabetes for instance, according to the International Diabetes Federation.
Healthcare spending in Saudi Arabia is set to increase to around SR174 billion ($46.4 billion) in 2017 from 68.7 billion in 2010, according to a November 2012 report from Riyadh-based NCB Capital.
Seeking to reflect such demand, Sulaiman Al-Habib Medical Group (HMG), one of the largest private providers of healthcare in the Gulf Arab region, has appointed the investment banking arm of Banque Saudi Fransi to assist with a planned share sale, two Saudi banking sources said, speaking on condition of anonymity as the matter has not been made public.
Almana General Hospitals (AGH), focused on the Kingdom's Eastern Province, also wants a listing on the local bourse and has appointed GIB Capital, the investment banking arm of Gulf International Bank, to help with the process, according to the sources.
HMG's initial public offering (IPO) is likely to be the largest for an established private company in Saudi Arabia since investment firm Kingdom Holding in 2007, one of the sources said. Kingdom, now worth $21.5 billion, had floated 5 pct of the company to raise SR3.23 billion.
HMG operates 14 medical facilities across Saudi Arabia, the United Arab Emirates and Bahrain, including seven hospitals and six medical centers. The group also owns the Olaya Medical Centre in Saudi's capital Riyadh, consisting of about 300 medical centers.
AGH had a net income of between SR100 million and SR150 million ($27 million to $40 million) in 2012 and the business could be valued at 13 times that figure, one source said. The company operates facilities in regions such as Dammam, Alkhobar, Jubail and Hofuf.
HMG did not respond to emails and calls seeking comment. An AGH spokesman was not available for comment.
Both companies are expected to list in the latter part of 2014 or early 2015, the sources said, with their applications set to be fast-tracked by the authorities. No details were yet available on what amount they were likely to raise but both would offer around 30 percent of their shares to the public.
"Saudi regulators would like to see more healthcare IPOs coming to the market, so it's unlikely that these companies will have a long waiting period like some of the other firms," a second Saudi-based banking source said, adding the increased diversification of a bourse dominated by petrochemicals and banks would be of benefit to investors.
The source also said planned government-led healthcare projects in the Kingdom may curb the profitability of private operators in future.
Saudi Arabia's stock market, whose constituents have a combined market value of about $430 billion, is the largest in the Gulf Arab region and the most active for IPOs. However it is not yet fully open to international investors and share issues are usually priced at a significant discount to benefit local citizens.
Outside the Kingdom, United Arab Emirates-based Al Noor Hospitals and NMC Healthcare have sold shares in London in the last 18 months and are around 48 and 71 percent up on their IPO price.