SGX Market Updates

Asian Healthcare Specialists – SGX’s First Orthopaedic Specialist Play


PUBLISHED ON |

20 April 2018

  • Asian Healthcare Specialists, which made its trading debut on SGX Catalist today, is a group of orthopaedic specialists who provide a wide spectrum of general and subspecialised treatments, including orthopaedic, trauma and sports services.

  • The Group’s vision is to create a one-stop specialist clinic consisting of senior and experienced orthopaedic medical specialists. It harnesses advanced technologies, including robots, to perform surgeries, including minimally invasive and keyhole procedures.

  • SGX lists 10 Catalist stocks under the GICS® Healthcare Service Providers sub-industry, and they have a combined market capitalisation of S$2.4 billion. The five largest Healthcare Service Providers – TalkMED, OUE Lippo, Clearbridge, SMG and Healthway Medical – have generated average total returns of +0.5% and +34.9% in YTD and 2017 respectively.




Asian Healthcare Specialists is a group of orthopaedic specialists, who provide a wide spectrum of general and sub-specialised treatments, including orthopaedic, trauma and sports services. Currently, it has five orthopaedic medical specialists operating at four clinics across Singapore, attending to both local and international patients.

Founded in 2013, Asian Healthcare Specialists aims to create a one-stop specialist clinic consisting of senior and experienced orthopaedic medical specialists. It harnesses advanced technologies, including robots, to perform surgeries, including minimally invasive and keyhole procedures. Asian Healthcare Specialists also provide a range of non-surgical services such as consultation and therapeutic orthopaedic procedures.



Increasing Domestic Healthcare Spending

Singapore’s prevailing demographics – such as an ageing population and the rise of chronic lifestyle diseases including diabetes and cancer – will continue to drive healthcare demand and government expenditure in the future. According to Finance Minister Heng Swee Kiat in a speech delivered on 6 December 2017, annual healthcare expenditure has more than doubled from S$4 billion in 2011 to S$10 billion in 2016. Looking ahead, this figure may grow to S$13 billion by 2020. For more details, click here.



Healthcare Service Providers on SGX Catalist

SGX lists 10 Catalist stocks under the GICS® Healthcare Service Providers sub-industry, and they have a combined market capitalisation of S$2.4 billion.

The five largest Healthcare Service Providers on Catalist by market capitalisation are: TalkMED Group, OUE Lippo Healthcare, Clearbridge Health, Singapore Medical Group and Healthway Medical Group. These five stocks have registered average total returns of +0.5%  and +34.9% in the 2018 year-to-date and calendar year 2017 respectively.

The table below details the 10 Catalist stocks under the GICS® Healthcare Service Providers sub-industry, sorted by market capitalisation. Click on the stock name to view its full profile in StockFacts.


Name SGX
Code
Market
Cap
S$m
19 April
Closing
Price
Total
Return
2017
%
Total
Return
YTD
%
12M
Total Return
%
P/E
(x)
P/B
(x)
TalkMED Group 5G3 927 0.705 36.6 3.7 -12.4 28.9 12.8
OUE Lippo Healthcare 5WA 273 0.123 150.0 -1.6 16.0 N/A 5.4
Clearbridge Health 1H3 268 0.550 N/A 54.9 N/A N/A 4.4
Singapore Medical Group 5OT 229 0.505 32.2 -12.2 -8.2 25.0 2.1
Healthway Medical Corp 5NG 226 0.050 63.6 -7.4 19.0 N/A 1.2
Singapore O&G 1D8 181 0.380 -23.2 -13.6 -43.3 21.3 4.2
ISEC Healthcare 40T 158 0.305 8.9 -3.2 3.7 19.9 2.4
HC Surgical Specialists 1B1 102 0.685 18.5 -0.6 21.2 66.5 7.4
Aoxin Q & M Dental Group 1D4 84 0.220 N/A 4.8 10.0 70.5 1.7
Asiamedic 505 20 0.050 -7.5 -19.4 -35.1 N/A 2.1
Average 34.9 0.5 -3.2 38.7 4.4

Source: Bloomberg & SGX StockFacts (Data as of 19 April 2018).




Asian Healthcare Specialists’ IPO

Asian Healthcare Specialists aims to be a one-stop integrated healthcare provider for orthopaedic procedures, including musculoskeletal-related medical care, post-surgery rehabilitation services such as physiotherapy, as well as ancillary services such as pain management.


Business Strategies and Future Plans:
  • Expand business through acquisitions, joint ventures or strategic alliances; invest in synergistic businesses, as well as in management and healthcare professionals.
  • Grow the “The Orthopaedic Centre” and “Asian Healthcare Specialists” brand names.
  • Grow the patient base by broadening its talent pool and providing comprehensive services.

Competitive Strengths by Management:
  • Asian Healthcare Specialists believes it has highly qualified and experienced medical specialists with 15 to 26 years of industry experience who will be able to use advanced techniques and technology to provide complex revision surgeries and treatments.
  • The Group believes it is well-positioned to tap on growing demand for private orthopaedic treatments stemming from demographics such as ageing population, rising income and more insured patients.
  • As its operating premises and some of the medical equipment are leased, the Group is able to keep capital expenditures low. Hence, it expects to be able to generate strong cash flows for its future expansion plans.
  • Asian Healthcare Specialists believes its business model is aligned with the interests of the founding medical specialists and employees.

Key Risks (page 33 of OfferDocument shows complete list of risk factors):
  • Asian Healthcare Specialists is dependent on their key medical personnel, and loss of these specialists will have an adverse effect on the Group’s business.
  • It is dependent on its skilled healthcare professionals and management personnel,including nurses and clinical staff.
    • Competitive pressures from other similar orthopaedic service providers in private and government-owned hospitals and smaller clinics. The Group may face lower margins, pricing pressure and lower market share from increasing competition.
    • Increase in operating costs, namely lease rental rates and risk of relocation, may disrupt its business operations.
    • Asian Healthcare Specialists may not have adequate insurance coverage.
    • Challenges faced by the healthcare industry will impact the Group.

Financials from Offer Document
  • FY17 adjusted profit for the year attributable to owners of the company was S$4.5 million, down 1.2% YoY. The adjusted profit took into account what the net profit of the Company would have been had the Employment Agreements and Service Agreements been in place since 1 October 2014 in lieu of the Consultancy Services Agreements.
  • Prior to adjustment, FY17 profit for the year attributable to owners of the company was S$0.4 million, as compared to S$2.0 million for FY16.
  • Asian Healthcare Specialists intends to declare an annual dividend of not less than 50.0% of its net profit attributable to shareholders for FY18 and FY19. Final dividend for FY18 includes an interim cash dividend of S$800,000 for its controlling shareholder, AHS Investment Holdings, on 31 January 2018.

Valuation
  • Asian Healthcare Specialists’ NAV per share based on the unaudited pro forma combined financial statements of the Group as at 30 September 2017 was 0.43 Singapore cents (before adjusting for the estimated net proceeds of the Placement and based on the pre-Placement share capital of 243.1 million shares) and 3.64 Singapore cents (after adjusting for the estimated net proceeds of the Placement and based on the post-Placement share capital of 290.0 million shares).
  • This implies a price to NAV ratio of 53.5x and 6.3x respectively.
  • P/E ratio based on the Placement Price and audited net EPS of the Group for FY2017 stands at 127.8x, while the Adjusted P/E Ratio based on the Placement Price and Adjusted EPS of the Group for FY2017 stands at 12.5x. This compares with an average P/E of 38.7x for the 10 Catalist stocks categorised under the GICS® Healthcare Service Providers sub-industry.

Additional Information from Offer Document

Business Segments
  • The Group has only one operating segment, which is providing medical consultancy and services in the field of orthopaedic medicine.

Geographical Segments
  • The Group operates in Singapore and all revenue and assets are derived from Singapore.

IPO Details 
  • Offer price at S$0.23. 
  • 46.9 million placement shares
  • Estimated market capitalisation at S$66.7 million.
  • Use of IPO gross proceeds of S$10.8 million will be as follows: 
    • S$8.5 million – Business expansion plans including organic expansion and M&As
    • S$1.0 million – Working capital
    • S$1.3 million – Listing expenses






This article is provided by SGX My Gateway.



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