Tuesday, July 20, 2010

KPJ to benefit

In the fight for control of Parkway between Khazanah and Fortis, KPJ is likely to benefit in the furure. In a moment. I shall tell you why.

Initially, Khazanah came out with a partial offer to buy Parkway at S$3.78 per share. Fortis who has a 25% stake in Parkway is said to be offering a full offer at S$3.80 per share. In the battle for supremacy, Khazanah is likely enhance its partial offer to a full offer and also to raise the bid price to S$4.00.

Parkway is in the healthcare business. They have hospitals in Singapore, Malaysia, China and India. KPJ is also in the healthcare business, having hospitals in Malaysia and Indonesia.

Khazanah is the investment arm of the Malaysian government. The majority shareholder of KPJ is the Johore state government. EPF also has a good stake in KPJ.

Should Khazanah eventually control Parkway, it is logical to assume that in the foreseeable future, there will be a merger between Parkway and KPJ. This likely scenario will keep KPJ in demand and therefore its price will not drop.

From a fundamental point of view, if Parkway is worth S$4per share, KPJ should be valued at RM3.70. And should there be a merger between Parkway and KPJ, then KPJ will be worth much more.