Parkway remains the dominant private healthcare provider in Singapore and is well-positioned to benefit from the growing demand for private healthcare in Singapore and the region. The group is well-positioned in Malaysia via its 40% interest in Pantai Holdings and has investments in China, India, Brunei and Vietnam. We believe Parkway’s franchise value is built on its track record and strong brand equity, with a scalable business model that allows it to grow its regional footprint via management contracts.
We estimate group gearing will rise to 0.7x by 2011, assuming there is no sale of medical suites. On this conservative scenario, Parkway generates an operating cashflow of S$140mn/year to support this level of gearing.
We derive our price target of S$1.85 based on a sum-of-the-parts valuation, which values the core Singapore operations at S$1.25bn (S$1.08/share). This implies a target P/BV of 1.5x and P/E of 21x, which is below its historical trading average.
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