Parkway buys 31% of Pantai

Parkway buys 31% of Pantai

Chan Sue Ling and Yoolim Lee, Bloomberg/Singapore

Parkway Holdings Ltd., Asia's second-biggest publicly traded hospital operator, bought a 31 percent stake in Malaysia's Pantai Holdings Bhd. for S$139 million (US$83 million) to expand in Southeast Asia.

The purchase of Malaysia's No. 1 private health-care service provider will double the number of hospitals Parkway operates in the region to 14. Parkway runs three hospitals in Singapore, two in Malaysia and one each in India and Brunei.

"The acquisition will enable us to grow our presence" in Malaysia, "from two hospitals to nine hospitals and ancillary facilities across the country," Chairman Richard Seow said today in a statement. "It is in line with our strategic direction of building on our strengths and growing in key regional markets."

Newbridge Capital LLC, a San Francisco-based fund that bought 26 percent of Parkway for S$312 million in May to become the biggest shareholder of the company, has said it aims to boost returns by focusing on acquisitions for regional expansion.

"Parkway is trying to grow the number of hospitals to provide the first-class health-care services in key cities like Singapore and Malaysia," said Jay Moghe, who manages $25 million as chief executive at Stork Capital Asia Pte in Singapore. "That makes sense, and I would be quite positive on the stock."

The acquisition would boost Parkway's earnings per share to 7.6 cents from 7 cents, based on the audited financial statements of the company and its subsidiaries at the end of 2004, Parkway said in a separate statement. Net tangible asset per share would fall to 37 U.S.cents from 54 U.S.cents, it said.

Kuala Lumpur-based Pantai posted net income of 43.5 million ringgit ($11.5 million) in the fiscal year ended June 30, 2005, compared with a loss of 112.7 million ringgit a year earlier. Sales rose 15 percent to 705.8 million ringgit.

Parkway's purchase is the latest in a series of corporate acquisitions between Malaysia and Singapore.

CIMB Bhd., Malaysia's biggest investment bank, in January agreed to buy G.K. Goh Holdings Ltd.'s stockbroking business for 555 million ringgit, expanding in Singapore as stock markets of the two countries strive to build closer links. Last month, Telekom Malaysia Bhd., the nation's biggest telephone operator, and Khazanah Nasional Bhd. agreed to pay S$260.8 million to increase their stake in Singapore's MobileOne Ltd.

"Since there was a change in leadership in both countries, there has been warming of economic cooperation and all the taboos are no longer taboos," said Moghe. "This is a trend that's likely to continue."

Malaysia's economy is forecast by the central bank to expand 5 percent to 6 percent this year, compared with the 3.5 percent to 4.5 percent growth the government expects in Singapore.

Malaysia, Southeast Asia's third-largest economy, earned 29.7 billion ringgit from tourism last year, making it the country's biggest foreign exchange earner after exports. The government wants to boost overall visitor arrivals to a record 16.8 million this year from 15.7 million in 2004.

Parkway shares fell 1 cent, or 0.5 percent, to S$2.14 at the close of trading, after gaining as much as 3.3 percent earlier. They have risen 43 percent this year, compared with a 12 percent rise in the benchmark Straits Times Index. The shares resumed trading at 2 p.m. after being suspended in the morning session.