Siloam International Hospitals Ready for Rights Issue
Siloam International Hospitals, Indonesia's largest private hospital operator, received the green light from shareholders to conduct a rights issue. Through the rights issue the company will issue 325.2 million brand new shares, equivalent to 25 percent of its enlarged share capital. Siloam aims to obtain IDR 3.09 trillion (approx. USD $232 million) worth of fresh funds through the corporate move.
Budi Wijaya, President Director of Siloam International Hospitals, said proceeds from the rights issue are to be used for further business expansion, both directly and through its subsidiaries. He added the company needs a significant amount of capital to realize its long-term targets.
In the rights issue Siloam International Hospitals will offer the new shares to existing shareholders for a price of IDR 9,500 (approx. USD $0.71) a piece, below the actual share price as traded on the Indonesia Stock Exchange. During the first trading session on Tuesday (05/09) shares of the hospital operator rose 0.47 percent to IDR 10,750 a piece.
So far in 2017 Siloam International Hospitals has already spent 90 percent of the budget that was allocated to capital expenditures this year. Moreover, this is a revised budget. In March 2017 the company decided to raise the 2017 capital expenditure budget from IDR 1.6 trillion to IDR 1.8 trillion. In 2016 the budget was set at IDR 1.3 trillion.
Currently, Siloam International Hospitals operates 31 hospitals, comprising 11 hospitals in the greater Jakarta area and 20 hospitals located across Java, Sumatra, Kalimantan, Sulawesi, Bali and Nusa Tenggara. Before the end of 2017 the company wants to have added two big hospitals to its portfolio (one in Jember, Central Java, and one in Lubuk Linggau, South Sumatra) as well as a number of medical clinics.
OSO Sekuritas believes the rights issue is positive for shareholders of Siloam International Hospitals because the proceeds are invested in business expansion and this should result in improving corporate earnings on the long-term. Moreover, the new shares are offered at an attractive price and in large quantity. One cause for concern, however, is that Siloam's price to earnings ratio (PER) is currently rather high at around 80 times.
Overall, Indonesia's hospital, health care and pharmaceutical industries are attractive because there exists a big Indonesian population that requires treatment. Moreover, rising per capita GDP allows people to spend more money on medicines and hospital visits. Lastly, the government is also eager to contribute as it introduced its ambitious (yet rocky) universal healthcare program several years ago.
Stock Quote Siloam International Hospitals - SILO:
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