SINGAPORE (June 3): Investors in the Singapore stock market will have yet another healthcare play to consider. While quite a few of the healthcare companies going public are a chain of clinics cobbled together, Alliance Healthcare, which has launched its IPO, generates about 40% of its revenue from its wholesale drugs business.
Executive chairman Dr Barry Thng says the company has built an extensive network of suppliers offering so-called “non-commercial drugs” that do not meet the typical volume of commercial drugs, either because demand is low or they have yet to obtain local authorities’ approval. The quantities involved typically are small, but the value is considerable. More importantly, Alliance Healthcare helps make these drugs available when required. “We help plug the gap,” explains Thng in an interview with The Edge Singapore.
The wholesale drugs business complements Alliance Healthcare’s managed healthcare service business, which is its other major component. Companies take out medical insurance plans for their employees, who enjoy coverage when they visit the clinics on the panel. Alliance Healthcare helps manage the administrative aspects of this ecosystem and takes a fee according to the services provided.
Over the years, it has built up a network of about 1,000 panel clinics, about 200 of which are regular purchasers of drugs from Alliance Healthcare. The company sells to other markets in the Asean region as well, says Thng.
At the same time, Alliance Healthcare has agreements with eight insurers and more than 2,000 corporate clients ranging from small local companies to MNCs.
The insurers include AIA Singapore, Aviva, AXA Insurance, The Great Eastern Life Assurance Co, NTUC Income Insurance Co-operative, Prudential Assurance Co Singapore, Tokio Marine Life Insurance Singapore and QBE Insurance (Singapore). The company is now finalising a deal with the ninth insurer by end-June.
Alliance Healthcare owns and operates its own chain of clinics as well. From just one general practitioner on Tanglin Halt Road more than 20 years ago, the chain has expanded to a total of 17 GP clinics, with 16 under the “My Family Clinic” name and one under the “Lee Clinic Pte Ltd” name. In addition, the company owns five specialist clinics comprising two colorectal, two ear-nose-and-throat and one orthopaedic.
On May 24, the company launched its IPO of 32 million shares at 20 cents each. Of the one million shares offered in the public tranche, the company received applications for 18.4 million shares. The remaining 31 million shares were also placed out. The new shares will enlarge the company’s share base by 15.4% to nearly 207.9 million shares, giving it a market value of $41.6 million, based on the IPO price of 20 cents.
Alliance Healthcare expects to raise gross proceeds of $6.4 million and net proceeds of $4.5 million. Most of the proceeds will be spent on acquiring other clinics and medical facilities, as well as setting up joint ventures and strategic alliances.
The company will also be spending $500,000 on technology systems by developing a centralised clinic management and electronic medical record system for its own GP clinics. The IT system will also include an electronic queue management system for patients. This system is slated to be ready in 2020.
For FY2018 ended June 30, 2018, Alliance Healthcare’s revenue rose 14.9% y-o-y to $33.8 million, from $29.4 million in FY2017. Earnings grew 129% y-o-y to $3.1 million, or 1.48 cents a share. At the IPO price of 20 cents, that translates into a historical price-to-earnings ratio of 9.5 times. While the company has not fixed a dividend policy, it is committing to paying at least 30% of its net profits in FY2020 and FY2021.
Thng says that, while the company has ambitions to grow and being a listed company will give it the structure and platform to do so more quickly, the doctors are clearly aware that patients care is the top priority. “When we were planning the IPO, some doctors asked whether we were going to do things differently. If so, they would not join us. We are not,” he notes.
CIMB Bank Singapore is the IPO’s sponsor and issue manager; the underwriter and placement agent is CGS-CIMB Securities (Singapore). The stock will start trading on May 31.
