Company set to transform into 4th biggest hospital group
LISTED healthcare companies today command among the highest valuations on any stock exchange. The world’s second biggest listed hospital operator IHH Healthcare Bhd trades at a considerably steep price to earnings multiple of 58 times.
Interestingly, the smallest public listed hospital operator, TMC Life Sciences Bhd also commands a high multiple of some 73 times historical earnings.
There is a significant difference between the two though. IHH’s market capitalisation stands at close to RM50bil and owns hospitals across Asia. TMC has a market capitalisation of RM1.5bil and presently has 200 beds.
TMC group chief executive officer Roy Quek reckons the growth prospects of TMC explains its high value.
Quek tells StarBizWeek that he is confident of delivering on the company’s growth expectations.
“We expect to record a double digit growth in terms of earnings before interest, taxes, depreciation and amortisation (Ebitda) this financial year 2017 (ending Aug 31). It would be a very decent performance. In fact our target is for a double-digit growth every year. We think the Ebitda is the best gauge to measure how our business is doing,” Quek says.
Indeed, with its expansion plans, the company is poised to morph into the fourth largest listed hospital group in Malaysia once its expansion plans are approved and executed.
The company, which is controlled by Singaporean tycoon Peter Lim Eng Hock, began initially as a fertility centre and today derives more than 80% of its revenue from hospital operations in Kota Damansara, Petaling Jaya.
Singaporean stockbroker billionaire Lim first emerged in TMC in 2010,when he emerged with a 29.6% stake after acquiring a stake from TMC’s founder Datuk Dr Colin Lee Soon Soo.
TMC later saw the emergence of Malaysian tycoon Tan Sri Vincent Tan as a major shareholder although subsequently Lim bought out Tan’s stakes also.
At present, TMC has 200 beds in its stable at its flagship Tropicana Medical Centre, and once its expansion plans are carried out, will see its bedcount growing to 600 and another 500 beds are also being planned at a new hospital in Johor called the Iskandariah Hospital.
Expansion at its Tropicana Medical Centre is slated to physically begin in two months and Quek says that things are going smoothly. “We will do a ground breaking ceremony in August and we expect all relevant approvals to come in by the end of August. We have been working very closely with the relevant authorities for the final building plan approval,” he says.
“The current hospital building sits on a third of the land that we have in Kota Damansara, our expansion plans will see another third of this land which is nearer to the Mass Rapid Transit station being developed and built on and after this we will still have the remaining one third for any future expansion that we feel we would like to carry out,” Quek adds.
For its Iskandariah Hospital, the company says it is still awaiting for a final approval from the ministry of health.
“This is because the model that we plan to put up is a different model of hospital building that we have in Malaysia. There isn’t an existing template that can be used to allow for a very quick approval process. So we are working very closely with the ministry and also the relevant government agencies such as the Fire and Rescue Department to try and come up with this template,” Quek says.
Current plans are for the Iskandariah Hospital to house a 23-storey tertiary hospital and another 33-storey medical tower which will house the private medical clinics.
“The design will be able to facilitate and enable team-care to wrap around the patient rather than having the departments operating in silos. A lot of use of information technology is required with a lot of space being devoted to new models of care and treatments. So the hardware and software will be quite unique from existing hospitals,”Quek says.
He notes that the scale of what is being proposed through the Iskandariah Hospital including some of the more collaborative specialisation it is pushing for has not been done before in Malaysia.
On whether the company would need to raise more funds for these expansion projects, Quek says it may take on additional external funding through borrowings if necessary in the future.
“The Kota Damansara expansion we do already have a fair amount of funding with us through internal means. We are looking to see whether we want to raise more funding for the two projects together or separately depending on timing. We don’t need to raise funds from the market, at most what we would do is through financing from the banks,” he says.
“We have almost RM600mil which would come in 2019, this is from our warrants that will mature in July 2019. We will decide once we are able to get the government’s approval for the Iskandariah Hospital, how we want to fund this project,” Quek adds.
He also expects that the Iskandariah Hospital would see some competition from the soon to be built Woodlands General Hospital in Singapore due to its proximity.
“We would need to know how to attract patients and we think the weaker Malaysian ringgit vis-a-vis the Singapore dollar exchange rates would help us here,” Quek says.
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