Citigroup puts 'sell' on Fortis Healthcare
Besides providing scale and geographical diversification, valuations appear reasonable at about 11x FY09 EBIDTA.
RESEARCH: CITIGROUP
RATING: SELL
CMP: RS 116
The first impression of Fortis���s acquisition of 10 hospitals from Wockhardt Hospitals (WHL) for Rs 910 crore is positive. Besides providing scale and geographical diversification, valuations appear reasonable at about 11x FY09 EBIDTA. Fortis expects the deal to be EPS accretive from the first year. The eight operational hospitals have 856 beds (scope to add 512), while the two other hospitals will have an additional 534 beds.
Most of the management and clinical team will also move over to Fortis. Fortis gains: a) Scale:49% to sales and 75% to EBIDTA b)Diversification into high potential markets in West (Mumbai), East (Kolkata) and South (B���lore ). c) Strong management and clinical team.
With the higher number of cash generating beds, it is now better placed to absorb early losses on newly commissioned hospitals. Excluding Rs 190 crore paid for the projects under construction, the deal valuation works out to about 11x FY09 EBDITA and about 8.5x FY10E EBIDTA.
RATING: SELL
CMP: RS 116
The first impression of Fortis���s acquisition of 10 hospitals from Wockhardt Hospitals (WHL) for Rs 910 crore is positive. Besides providing scale and geographical diversification, valuations appear reasonable at about 11x FY09 EBIDTA. Fortis expects the deal to be EPS accretive from the first year. The eight operational hospitals have 856 beds (scope to add 512), while the two other hospitals will have an additional 534 beds.
Most of the management and clinical team will also move over to Fortis. Fortis gains: a) Scale:49% to sales and 75% to EBIDTA b)Diversification into high potential markets in West (Mumbai), East (Kolkata) and South (B���lore ). c) Strong management and clinical team.
With the higher number of cash generating beds, it is now better placed to absorb early losses on newly commissioned hospitals. Excluding Rs 190 crore paid for the projects under construction, the deal valuation works out to about 11x FY09 EBDITA and about 8.5x FY10E EBIDTA.
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