The big hospital boys in the industry may be riding on the recovery of the economy, but the smaller niche players are finding it tougher to latch on to the same growth opportunities and attract investors.
Among the listed companies that were taken private last year, three were healthcare stocks: Singapore Medical Group (SMG), Singapore O&G and Asian Healthcare Specialists. Another notable delisting of a listed healthcare company would be that of Health Management International, which operates hospitals and specialist centres in Singapore and Malaysia. It was taken private in 2019 by its controlling shareholders together with private equity firm EQT Partners.
For the remaining healthcare stocks, their most recent results announcements were not entirely positive. One instance is Q&M Dental Group 7, known as a fast-growing stock which operates Singapore’s largest network of dental clinics in Singapore, plus some clinics in Malaysia and China.
In FY2021 ended December 2021, Q&M hit a peak, recording a 52% y-o-y rise in earnings to $31.3 million as revenue rose 49% y-o-y to $205.6 million, thanks to organic growth from its dental clinics plus new contribution from Acumen, its diagnostics joint venture. An additional unexpected boost came from providing a range of pandemic-related testing services, sending its share price to a peak of 71 cents on Aug 6, 2021.
However, with the pandemic over and testing requirements largely gone, Q&M’s earnings have taken a hit. In its latest FY2022 results, earnings were down 70% y-o-y to $9.38 million, while total revenue declined by 12% y-o-y to $181.2 million. The absence of government grants, given to all local businesses to help cope with the pandemic, further weighed on the bottom line.
On top of lower revenue, FY2022 earnings also fell due to the recognition of other losses and an absence of a one-time gain on the disposal of its China-based associate and dental supplies manufacturer Aidite in 1HFY2021, as well as an increase in allowance for impairment on inventories and other receivables in FY2022.
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Earlier reports have suggested that Acumen could be spun off for a listing on Nasdaq. However, there is no update so far on whether this is still on track to happen. Analysts have previously been upbeat on this news and believed that the spin-off listing could unlock a huge value.
Q&M had previously spun off a listing of its China operations — Aoxin Q&M 1D4 , which went public in April 2017. Since its listing, Aoxin Q&M’s share price has dipped by about 62.9% to close at 12 cents on March 7.
As for Q&M, its share price has declined by 32.4% in the past 12 months to close at 34 cents on March 7.
Apart from Q&M, there are several other players in the healthcare space with lacklustre earnings, despite the overall bullish view held by most about the long-term structural growth of the industry due to Asia’s ageing population.
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Singapore Paincare Holdings FRQ , for example, specialises in pain management and provides related services via a chain of clinics here. Its latest 1HFY2022 ended Dec 31, 2022, saw earnings decline by 64.0% y-o-y to $0.8 million, although revenue did increase by 32.4% y-o-y to $11.0 million.
The company’s revenue growth was attributed to its participation in the national vaccination programme as well as the post-Covid reopening of borders, which led to an influx of medical tourists seeking specialist pain care treatments. The top line was also boosted by the new contribution from the Centre for Screening and Surgery (CSS), which was acquired in February 2022. Post-acquisition, CSS accounted for approximately 10.0% of Singapore Paincare’s revenue in 1HFY2023.
The reason for the decline in earnings was mainly due to a one-off impairment loss on investment in a 45%-owned associate that was included under other expenses, and higher overall expenses in line with the expansion of the company’s operations.
Overall, Singapore Paincare is optimistic about its prospects for the next 12 months, on the back of new initiatives under the government’s Healthier SG plan and its national blueprint to expand active ageing centres that will eventually evolve into centres for preventive care.
Another specialty medical facility operator, Livingstone Health PRH , formerly Citicode, is adopting several post-Covid strategies after Livingstone’s CEO Wilson Tay noticed that the pandemic has triggered a shift in the operating environment.
Manpower shortage and operating costs have increased since the pandemic started, even as the government continued to emphasise preventive healthcare through the Healthier SG initiative.
In response, Livingstone plans to centralise its operations and tap economies of scale at its new headquarters; increase the footprint and patient touchpoints of its primary care arm through its 51%-owned subsidiary Phoenix Medical Group; and strengthen its ecosystem and patient base, while improving internal efficiencies.
In its latest 1HFY2023 ended Dec 30, 2022, Livingstone reported a 57% y-o-y decline in earnings to $0.89 million while revenue saw a slight 3% increase to $16.4 million.
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The higher topline was propelled by improved performance in its anaesthesiology and pain management, and orthopaedic business segments amid higher patient volumes, as well as internal medicine which added a doctor. But higher expenses were a drag on the bottom line, as the company’s expansion plans were put in place.
For Alliance Healthcare MIJ , the operator of clinics, telehealth and homecare services, earnings for its 1HFY2023 ended Dec 31, 2022, were up by 14.1% y-o-y to $1.92 million, while revenue saw a slight 1.2% growth to $28.9 million.
The overall increase in revenue was mainly attributable to an increase in sales generated by the group’s general practitioner (GP) clinic services, specialist care services, managed healthcare solutions and pharmaceutical services. These were partially offset by a decrease in revenue from the mobile and digital health services business segment, as Covid-related healthcare services decreased.
Alliance Healthcare expects its physical healthcare facilities to see higher volumes of patient visits as the pandemic retreats from Singapore. But it warns that an economic downturn or unabated inflation could hurt growth and profitability. On the other hand, the company expects its telemedicine services, which gained traction during the pandemic, to wane.
Diagnosticians and health tech players
The healthcare space is a large one and there are several companies with adjoining businesses. These include providers of diagnostic and screening services, as well as pharmaceutical companies.
Clearbridge Health 1H3 provides medical diagnostic and screening services through a network of clinics in Singapore and Indonesia. The company has a market capitalisation of around $18.5 million. Although revenue has been showing consistent growth since it was listed, earnings have not, with most years sporting a loss. Since its listing in 2017, the company was profitable only in FY2020 with earnings of $0.62 million. It went back into the red again for FY2021 with a loss of $20 million, which Clearbridge Health explains was due to a fair value loss in Biolidics 8YY , its separately-listed associate. It incurred higher costs in FY2021 too.
On Feb 15, Clearbridge Health applied to the market regulator to delay the announcement of its FY2022 results by a month till April 1, citing difficulties in accessing financial records at two of its indirect subsidiaries in Indonesia that were sold off late last year.
Meanwhile, HC Surgical 1B1 , which specialises in endoscopic procedures, saw its revenue dip 2.8% y-o-y to $10.1 million for 1HFY2023 ending Nov 30, 2022. Besides offering medical services, HC Surgical has taken stakes in other related, listed companies, such as Medinex OTX , which provides administrative services for clinics; Singapore Paincare Holdings, which specialises in pain management; and Q&M’s associate Acumen.
In 1HFY2022, HC Surgical was able to book a fair value gain on financial assets of some $690,000 as their share prices rose. Conversely, for 1HFY2023, when the share price of Medinex declined, HC Surgical got to book a fair value loss of $0.9 million instead. Together with other reasons, such as higher costs, such as goodwill impairment, HC Surgical’s earnings dropped by 55.8% to $2.1 million.
While rising interest rates, leading to higher costs of doing business, is a concern for the group, it has revamped its operations, including closing its Anchorvale centre to focus on the newly opened Siglap centre; placed fixed deposits with banks to capitalise on higher interest rates; and developed other cost-cutting measures while improving operational efficiencies.
Evidently, despite the recent challenges, HC Surgical has been actively looking for new growth. On March 1, it announced the acquisition of a 35% stake in an orthopaedic business for $2.45 million, marking its diversification into this other major medical specialty.
However, things have been looking up for Hyphens Pharma International, a specialty pharmaceutical and consumer healthcare group. In its FY2022 ended Dec 31, 2022, earnings saw a significant increase to $11.4 million from $6.8 million, as revenue gained 28.9% y-o-y to $162.3 million.
Last year, Hyphens Pharma 1J5 enjoyed broad-based revenue growth, thanks to its specialty pharma segment, proprietary brands and medical hypermart and digital businesses. The newly acquired Novem contributed some $17 million in revenue. It raised its dividend payout significantly to 1.11 cents, from 0.67 cents in the previous year.
Last May, the company completed its internal restructuring to consolidate all its digital assets under DocMed to develop an integrated digital health-tech platform. A month later, DocMed completed its share subscription to Metro ARC Investments, a wholly-owned subsidiary of Metro Holdings, which resulted in a capital injection of $6 million in DocMed over 24 months, to fund further growth across the region.
Hyphens Pharma is staying focused on its proprietary brands, which are “enjoying robust growth in sales and brand equity”, says the group. It says that it will continue its marketing strategy to nurture the brands in its current markets. It will also look to seek partnerships to enter new markets and invest in innovation to develop new and improved products under its brands.
