Indonesia billionaire family reshuffles empire on currency rout

Indonesia billionaire family reshuffles empire on currency rout

19/09/18, 07:32 am

SINGAPORE/JAKARTA (Sept 19): Southeast Asia’s billionaire Riady family is reshuffling its health-care holdings as its core property business grapples with the emerging-market rout.

OUE Lippo Healthcare Ltd., a hospital operator backed by the family, agreed to buy 10.6% of Singapore-listed First REIT, according to a statement Tuesday, which confirmed an earlier Bloomberg News report. It will buy the stake for about $103 million from PT Lippo Karawaci, an Indonesian developer controlled by the Riadys, it said in a Singapore exchange filing.

The company plans to raise about $150 million in a rights issue to fund the purchase, the filing shows. OUE Lippo Healthcare will offer existing investors 1 new share for each share they already own at 6.75 Singapore cents apiece, representing a 28% discount to the stock’s theoretical ex-rights price.

“The proposed acquisitions will bring three key benefits to OUE Lippo Healthcare’s long-term strategic goals,” OUE Lippo Healthcare Chairman Lee Yi Shyan said. “They enable the company to diversify into a key healthcare market such as Indonesia. Further, they fit well with our asset-light growth model, and thirdly, they are earnings accretive.”

Medical Market

Indonesia’s healthcare market is expected to reach US$32 billion in revenue by 2022, according to data released earlier this year from Ken Research, as more medical services become available for the first time to those living in underdeveloped and rural areas. A population that’s living longer is boosting demand for prescription sales and new drugs, while a rising middle class means people are spending more on their physical well being.

OUE Lippo Healthcare and its controlling shareholder, OUE Ltd., will also buy full control of First REIT’s manager for a total of $99 million. OUE Lippo Healthcare will get a 40% stake in the manager, while OUE will hold 60%, according to the filing.

First REIT has a portfolio of about 20 healthcare-related properties spread across Indonesia, Singapore and South Korea. Based on its 2017 financial results, the deal is expected to result in a distribution of about $7.1 million to OUE Lippo Healthcare and its subsidiaries.

Moody’s Warning

Oversea-Chinese Banking Corp. is sole financial adviser to OUE Lippo Healthcare on the acquisition, as well as manager of the proposed rights issue.

Moody’s Investors Service warned earlier this month that Lippo Karawaci is among Indonesian companies that are most vulnerable to weakness in the local currency. Lippo Karawaci’s debt is largely denominated in dollars while its cash flow is in rupiah, and additional weakness in the currency could have economy-wide effects, according to Moody’s.

Lippo Karawaci’s President Director Ketut Budi Wijaya said the transaction would improve the company’s liquidity substantially. The funds will “ultimately strengthen Lippo Karawaci’s balance sheet and further enhance its cash flow,” he said in a statement.

Stock in Lippo Karawaci declined 3.3% to 352 rupiah in Jakarta as of 1:42 p.m. local time. OUE Lippo Healthcare, OUE and First REIT were halted from trade before the announcement.

DBS undergoes target price cuts after a record FY18, but remains a 'buy'

SINGAPORE (Feb 19): Jefferies Singapore, OCBC Investment Research and RHB Research are maintaining their “buy” calls on DBS Group while lowering their price targets to $28.50, $29.31 and $28.80, respectively. This comes after the release of its 4Q18 results, which saw earnings grow 8% y-o-y to $1.32 billion to bring the bank’s earnings for the full year to a record high of $5.63 billion. In a Tuesday report, Jefferies analyst Krishna Guha says he has lowered his FY19-20 earnings per share (EPS) estimates on the back of reduced loan and non-interest growth, although valuations remai....

Winners and losers from Singapore's budget as election looms

SINGAPORE (Feb 19): Singapore Finance Minister Heng Swee Keat boosted health-care and military spending, gave tax rebates to citizens and tightened rules on foreign workers ahead of an election that could come as early as this year. Heng announced a new $8 billion support package for seniors in his budget speech on Monday, as well as measures to help local businesses adopt new technologies. The expansionary fiscal plan will push the overall budget deficit to 0.7% of gross domestic product in the year ending March 2020, from a revised surplus of 0.4% this year. The finance minister opened....

Sasseur REIT FY18 DPU exceeds IPO forecast by 12.6%

SINGAPORE (Feb 18): The manager of Sasseur REIT announced a 4Q18 DPU of 1.999 cents, 28.1% higher than forecast. This also brings 2H18 DPU to 3.541 cents and FY18 DPU to a total of 5.128 cents. Sasseur REIT offers investors the unique opportunity to invest in the fast-growing retail outlet mall sector in China through its initial portfolio of four quality retail outlet mall assets. 4Q18 distributable income came in at $23.6 million, 28.1% higher than forecast while EMA rental income came in 1.6% higher than forecast at $31.2 million. Based on the Feb 18 closing unit price of $0.71,....