KUALA LUMPUR (Sept 15): IHH Healthcare Bhd shares are trading at expensive valuations, prompting Public Investment Bank to maintain its "neutral" call on stock.

In a note today, Public Investment analyst Siew Jin Ling said IHH shares were transacted at a forward price-to-earnings ratio (PER) of 45 times against earnings in financial year ending December 31, 2015 (FY15).

“Our TP (target price) remains unchanged at RM4.50, pegged to FY15 blended EV/EBITDA valuations. The group will continue to see strong revenue growth underpinned by its capacity expansion, especially as more beds are added in 2015, with the newly-opened hospitals expected to contribute to the Group's revenues.

“Nonetheless, we maintain our "Neutral" call on IHH, as we believe the stock is richly valued for now, at 45x FY15 PER,” said Siew, who also maintained Public Investment's income forecast for IHH.

Bloomberg data showed that IHH's 45 time PER, compared with FBM KLCI's estimated PER of 15 times in 2015.

Malaysian government investment arm Khazanah Nasional Bhd owns 43.78% in IHH, which is also a KLCI component company.

At 12.30pm, IHH shares fell four sen or 0.8% to settle at RM4.94, for a market capitalisation of RM40.4 billion. The stock had risen 28% this year, outperforming the KLCI's 1% decline.

Public Investment has issued its note in response to IHH's proposed acquisition of a 100% stake in Radlink-Asia Pte Ltd, from Fortis Healthcare Singapore Pte Ltd for S$137 million (RM346.53 million).

Singapore-based Radlink-Asia specialises in outpatient diagnostic and molecular imaging services in the neighbouring country.

Siew believes the earnings contribution to IHH Healthcare Bhd from the acquisition of Radlink-Asia Pte Ltd, will not be significant.

"Details are scarce on the proposed acquisition, and the financial performance of Radlink-Asia is not available. Nonetheless, we believe the latter's profit, if any, would not be significant, relative to the Group's bottomline.

"While no rationale has been offered, we believe synergy, rather than profitability, could be the main driver of the acquisition, as Radlink's network of primary care clinics and diagnostic centres would mold well with the Group's existing Parkway Shenton clinics and Parkway Radiology and Laboratory Services in Singapore, which complement its main hospital business," Siew said.