New names in healthcare

  • Property
  • Saturday, 21 Mar 2015

What Bustari, Buhtamam and other shareholders such as Sabah’s Economic Development Corp bring to the table will be closely watched

NEW names are cropping up in the local medical and pharmaceutical industry amid rising valuations of global companies in the same industry.

Among these names are that of well-connected Sarawak businessman Tan Sri Bustari Yusuf as well as Datuk Ag Buhtamam Ag Mahmun who sits on the boards of several private Sabah-based companies.

The 64-year-old Bustari, who is from Sibu, is group chairman of Sarawak-based outfit OBYU Holdings Sdn Bhd, an investment holding company which has its finger in a slew of major industries including property, construction, plantations and telecommunications.

He has also been an independent non-executive director at PPB Oil Palms Bhd since February 2007.

In 2009, Bustari bought a 30% stake in hook-up and commissioning and topside maintenance outfit Petra Energy Bhd, marking his foray into the oil and gas industry. At last look, he holds a 27.47% interest in the company via Shorefield Resources Sdn Bhd.

Faber has a concession agreement for the provision of support services to government hospitals in the northern states, Sabah and Sarawak. Bustari (inset) is group chairman of OBYU Holdings.

Bustari’s involvement in the healthcare industry, meanwhile, is through Metrocare Services Sdn Bhd that has a 60% stake in One Medicare Sdn Bhd, the company with the concession to operate and manage hospital support services (HSS) in Sarawak for a 10-year period.

Integrated facilities management firm Faber Group Bhd holds the remaining 40% in One Medicare.

In Metrocare Services itself, Bustari has a 36% interest while the other 24% of the company is held by a joint venture owned by the state government and Simfoni Dua Sdn Bhd.

Interestingly, Petra Energy executive director and chief executive officer Datuk Anthony Bujang is also a director in One Medicare and was appointed to that position in February 2013, according to information from the Companies Commission of Malaysia (CCM).

It is unclear if this is Bustari’s maiden venture into the healthcare business.

Bustari is a well known figure in Peninsular Malaysia and influential in Putrajaya.

He is also said to be the go-to man for many companies seeking to do business in Sarawak because of his extensive links in the state. Bustari’s brother Datuk Fadillah Yusof is the Works Minister.

Sabah native Buhtamam, meanwhile, marks his interest in healthcare through Sedafiat Sdn Bhd, a firm which also holds 60% of a concession to carry out HSS over the same period of 10 years – in Sabah.

The 60% in Sedafiat is held under 1Care Consortium Sdn Bhd, in which Buhtamam has a 24.9% interest. The other major shareholder in 1Care Consortium is an agency under the Sabah state government.

The 55-year-old Buhtamam, who is on the board of state university Universiti Malaysia Sabah (UMS), is Sabah branch Malaysian Malay Chamber of Commerce president.

According to reports, among his corporate activities, he is executive chairman at a string of Sabah-based private firms including One Holdings Sdn Bhd, Nicaria Sdn Bhd, One C&C and Agensi Pekerjaan Emcojuta Sdn Bhd.

He is also group chairman and director at UMS Link Holdings Sdn Bhd, which is UMS’ commercial and business arm whose main objective, according to its website, is to “generate revenue for the university”.

Questions arise

Essentially, the subject of both Buhtamam and Bustari emerging in such concessions arose after Faber recently said that it had sealed a new concession agreement for the provision of support services to government hospitals in Perak, Penang, Kedah and Perlis as well as East Malaysia.

In Sabah and Sarawak, Faber, under the new concession agreement is now a minority shareholder in concessionaires, One Medicare and Sedafiat as opposed to having full ownership before.

The question is why Faber, which has all the expertise to carry out such services, only has an ownership of 40% in the concessionaires? Also what would Bustari, Buhtamam and the other shareholders of the concession firms such as Sabah’s Economic Development Corp bring to the table?

Faber must have poured in some sort of investment including to acquire the necessary assets for its East Malaysian business. So are its efforts being rewarded?

The market does not seem to have taken these developments in Faber well. Investors sold down Faber shares, pushing it down to multi-week lows on Monday after a StarBiz report on the same day highlighted such concerns.

Recall, Faber, which is 70.7% owned by UEM Group Bhd, had seen its previous HSS agreement with the Government, which was for a tenure of 15 years and for the provision of support services to government hospitals in the northern states and East Malaysia, expire in October 2011.

What followed was an interim HSS agreement and a letter from the Government stating that Faber would continue to service the existing concession terms and conditions until a new agreement was signed.

On March 11, Faber finally announced that it had sealed a new concession agreement but with its stakes in its East Malaysian concessions diluted to 40% from the previous 100%.

This development was, however, already made known as early as two years back but perhaps only now that it has been formalised is it sinking in with Faber investors.

Besides Faber, Pantai Medivest Sdn Bhd and Radicare (M) Sdn Bhd are the other two government concessionaires that provide support services to more than 50 government hospitals nationwide.

Pantai provides services to hospitals in the southern region while Radicare’s services are centred on the central and east-coast region.

Gaining attention

While questions are unanswered for now and Faber is left adjusting to what could be lower revenues, moving forward, one cannot deny that activities in the overall healthcare industry have been gaining attention.

Locally, the current debate about who should dispense drugs – pharmacists or doctors – has ignited investors’ interest in stocks of that nature as evident by the share price movements of counters like Pharmaniaga Bhd and CCM Duopharma Biotech Bhd which are up 18% and 15% respectively in the past one month.

Notably, the interest in CCM Duopharma could also be due to the shareholders’ nod that it obtained last week for the takeover Chemical Co of Malaysia Bhd’s (CCM) pharmaceutical arm in a deal that was valued at RM245.1mil.

Pharmaniaga’s uptrend, meanwhile, could also be attributed to the healthy 75% jump in net profit to RM36.69mil that it reported for its fourth quarter ended Dec 31, 2014.

Globally, the Financial Times said another round of mergers and acquisitions is sweeping the pharmaceutical sector, continuing from last year’s boom in healthcare dealmaking.

Citing bankers and executives, it said further merger and acquisition activity was likely across the sector as bigger players looked for good assets to buoy growth.

Up to January, more than US$9bil worth of deals had reportedly been announced, an increase of 165% from the same period a year ago.

Quoting Citi analysts, The Wall Street Journal says “the wave of deal-making has pushed valuations increasingly higher and pharma stocks across the globe are now trading in the upper quartile of their historical price-to-earnings ratios.”

While the value of Malaysia’s healthcare industry is hardly near the value of its large global counterparts, analysts remain positive, saying that the industry has the potential to grow from its current low base.

“We believe that the healthcare sector remains a draw, given its defensive nature and attractive long-term growth prospects,” RHB healthcare analyst Alexander Chia notes.

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