The ongoing IPO of Singhe Hospitals is experiencing slow pick up given bearish sentiments on equities whilst the management expressed confidence that performance had improved with a likelihood of dividend next year.
The Initial Public Offering of 25% stake or 100 million shares at Rs. 2.50 each officially opened on 12 March. As of 19 March, Singhe Hospital had received 428 applications requesting for 17.4 million shares worth Rs. 43.5 million. The company is seeking a listing on the Diri Savi Board.
Singhe Hospitals Managing Director Navinda Weerasinghe said that the company had achieved its budget targets for 2014/15 and would continue to improve performance from the new financial year 2015/16 onwards with capital infusion from the IPO.
“We firmly believe in paying dividends to the investors with better profits generated from the IPO proceeds. This is in turn expected to increase our bottom-line. As such, the IPO investors will be able to reap benefits from dividends and increase in earnings,” Weerasinghe told the Daily FT.
The assurance comes on the back of losses reported for FY2014.
Singhe Hospitals posted revenue of Rs. 164 million as at 31 March 2014, up from Rs. 33.3 million in 2013. The company incurred finance costs of Rs. 51.9 million, up from a previous Rs. 50.6 million leading to a Rs. 131.6 million loss for the year, as compared with a loss of Rs. 107.9 million in 2013. Notably total comprehensive income for the year declined sharply to Rs. 37.1 million boosted significantly by a Rs. 94.5 million gain on revaluation of land and building in 2014. Basic loss per share stood at Rs. 4.69, against a previous Rs. 7.19 per share.
Of the Rs. 250 million IPO, Rs. 140 million will be used to partially settle the loans obtained from Bank of Ceylon and Rs. 30 million to settle the Bank Overdraft facility. This will enhance earnings per share and the net asset value of the company with 100% savings due to tax-free BOI project.
Balance funds will be directed towards the purchase of medical equipment, including new laparoscopy and mammography machines, in addition to the planned expansion of lab facilities, the establishment of an eye surgical unit, construction of a new car park and the purchase of fresh pharmaceutical and lab stocks.
As per the share valuation prepared by B.R. De Silva & Co. Chartered Accountants included in the prospectus for prospective investors, free cash flow valuation stood at Rs. 2.59 per share whilst the Price to Book value valuation stood at Rs. 1.73 per share.
Situated in the heart of Ratnapura, Singhe Hospital is a BOI-approved project started in December 2009 and enjoys a five-year tax holiday. The first private hospital to be established in the Sabaragamuwa District, Singhe Hospital reportedly records 15,000-20,000 patient visits monthly.
Navinda is the son of Chairman A.M Weerasinghe and was educated in the US, where he specialised in Business Management. He is personally steering the hospital with the guidance of Weerasinghe Sr. and the Board of Directors. He firmly believes in developing an organisation to a greater profitability and providing a return to the investors from day one.