SINGAPORE (Mar 27): As stock markets flounder amid the outbreak of the Covid-19 virus, Dr Barry Thng, executive chairman of Alliance Healthcare, is confident the company can withstand the health crisis. “I’m not particularly affected by the share price since investors’ reluctance to invest will not be permanent as seen during SARS,” Thng tells The Edge Singapore.
In a vote of confidence for his own stock, Thng made his first purchase on the open market since the company’s listing. On Feb 18, he bought 10,000 shares at an average of 20.5 cents each. The following day, he bought another 24,900 shares at 19.9 cents each. Thng wants to signal that the company’s share price— at current levels — deserves a higher valuation. “With a lot of developments coming up, we wanted to create some activity,” Thng says of his insider moves.
Nearly one year after Alliance Healthcare went public, its share price has barely moved the needle, closing at 19.7 cents on March 25, giving it a market cap of some $41 million. However, Thng says Alliance Healthcare has benefited from the public listing. “As a manged healthcare business that deals with insurers and corporate clients, being listed gives an independent validation of our internal risk control, data security and [adherence] to financial regulations,” he explains.
The discipline needed to run a listed company has also helped Thng prioritise. “We do not aspire to be the biggest GP group or specialist care provider. That is not our goal,” he adds. Instead, the group is focused on building its capabilities in primary, secondary and mobile care to ensure quality healthcare remains affordable and accessible. It plans to do this through its 16 clinics operating under the “My Family Clinic” umbrella and five specialist clinics focused on colorectal, orthopaedic and ear-nose-throat care.
As of Dec 31, 2019, Alliance Healthcare has spent $1.38 million, or 21.6% of the $6.4 million raised during IPO, on expanding its suite of clinics and specialist care services, and investing in technology and enterprise software. Another $87,000 or 1.4% was spent on its pharmaceutical services business which distributes commercial drugs like antibiotics and non-commercial or orphan drugs that are either out of stock or not required in large quantities. One such little-known drug is Syprine which treats Wilson’s disease, where the liver is damaged from an abnormal build-up of copper. The drug retails for close to $7,000 a box, but Alliance Healthcare supplies Trientine, a generic replacement retailing at just a tenth the price.
Going digital with telemedicine
With the remaining $3.3 million from its IPO fund-raising, Alliance Healthcare is now exploring possible areas such as new specialist clinics and specialisations to venture into. Other than just adding clinics, the company plans to beef up its digital capabilities so it can run a more efficient business.
Against the backdrop of the virus outbreak, Thng believes the demand for telemedicine will rise, especially since patients can access quality healthcare in the comfort of their own homes without being exposed to other patients in clinics.
This was the motivation behind the launch of its HeyAlly app last month. Among the functions the app boasts are a clinic locator, appointment booking service, teleconsultation and the provision of healthcare vouchers. It also provides patients with a second opinion, especially for chronic diseases.
“About 60–70% of healthcare problems can be solved at the primary care stage, so with HeyAlly, we want to provide quality treatment that saves patients [out of pocket] costs from a misdiagnosis, multiple visits to the doctor and a long waiting time before a consultation,” Thng explains.
Through the platform, patients can schedule and pay for clinical services as well as medical equipment and consumables which will later be delivered to the patients’ homes. Aside from this, the platform boasts a network of over 500 independent licensed healthcare professionals who are able to remotely access health data, clinical reports and clinical workflows through the platform. This enables patients to book for home-based services such as physiotherapy or nursing care.
The launch of HeyAlly took place not long after Alliance Healthcare’s venture into digital services when it acquired a 55% stake in Jaga-Me, a digital healthcare platform, for $3.5 million last December. Thng had approached Jaga-Me’s founders last year, after identifying the platform as a potential acquisition target.
The deal drew several queries from the Singapore Exchange. This comes as Jaga-Me’s losses widened to $682,247 in FY2018 ended Dec 31,2018, from losses of $384,810 in FY2017 ended Dec 31 2017. And so, in its query to Alliance Healthcare, SGX notes that Jaga-Me’s implied valuation of $6.37 million - based on the $3.5 million that Alliance Healthcare paid for its 55% stake - is in stark contrast to Jaga-Me’s NTA of just below $0.39 million. Furthermore, no independent valuation was conducted.
Alliance Healthcare says the purchase and subscription consideration was arrived at after taking into account the management’s expertise, technological know-how, the market potential and business prospects of Jaga-Me. This was subsequently benchmarked against the past transacted value of Jaga-Me’s shares.
For now, Thng has not seen a surge in the usage of HeyAlly and Jaga-Me following the outbreak of Covid-19, however, he does expect a pick-up as the apps gain traction. And with independent research house Market Research Future projecting the size of the telemedicine industry is to hit US$56.7 billion ($78.9 billion) from 2017 to 2023, Thng believes the company is headed in the right direction.
Setting up a regional footprint
Alliance Healthcare also harbours regional ambitions. One way to expand beyond Singapore is through its subsidiary, Alliance MediNet, which provides third-party healthcare administration services. Alliance Medinet, which services some 2,000 corporate clients, has a three-year collaboration with Inova Care, a global player, to tap into each other’s networks. By doing so, both companies can tap into each other’s networks, thereby lowering their costs and providing clients with easier access to more clinics, says Thng.
Aside from this, Thng is also looking at ways to grow the business. To investors, an obvious way would be to expand the number of specialist doctors, since patients are more willing to pay for the specialised care and the business can in turn enjoy higher profit margins.
While the assumption is broadly correct, Thng says the devil is in the execution. “It is not easy to grow a specialist business as you will have to rely on patient referrals. There is no point having a doctor without a steady supply of patients,” he says. So for now, Alliance Healthcare will still place a greater emphasis on primary care.
Interestingly, the company faced a probe by the Ministry of Manpower (MOM) last November over the employment of a locum doctor on a work pass at its My Family Clinic Hougang Central which is said to contribute 5% to Alliance Healthcare’s total revenue. While the probe has now been addressed, Thng says it was “an important lesson and we are more careful when hiring doctors now”.
For all that has been said, Alliance Health care seems to be on the right track. Earlier this year, it was awarded a contract to provide managed healthcare solutions to 38 companies, including major healthcare institutions such as Changi General Hospital, KK Women’s and Children’s Hospital, Singapore General Hospital and National Health Group Polyclinics.
In 1HFY20 ended December, Alliance Healthcare reported earnings more than doubled to $1.6 million from $0.5 million for a year ago. This translates to earnings per share of 0.78 cent from 0.26 cent previously, on a fully diluted basis.For the half year, revenue increased 22.3% to $20.8 million following higher sales contribution across all its business segments. Segmentally, income from its specialist care services surged 88.6% to $4.9 million, after its orthopaedic clinic opened for business in December 2018. Meanwhile, revenue from its managed healthcare solutions was up 12% to $2.9 million on higher value of claims processed. Income from GP clinics rose 3.7% to $8.6 million while that from pharmaceutical services rose 25% to $4.4 million from higher sales in Singapore.
Meanwhile, expenses also more than doubled to $1.1 million, due to higher depreciation and amortisation expenses and a doubling of finance costs to $128,169. This was mitigated by a 27.1% drop in other expenses to $1.7 million in the absence of IPO-linked expenses.
Thng says he is encouraged by the results and is looking to win more contracts and opportunities through “continuous innovation and excellent execution”. “We will continue to deliver seamless quality healthcare to the patients, providing differentiated and cost-effective healthcare solutions for various medical needs, such as hospitalisation, critical illness care, and chronic care,” he adds.
