Health Management International (HMI)

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#1
Health Management International is a small cap medical company operating in Singapore and Malaysia. It has 2 core business - owning and operating 2 Hospitals in Malaysia and running a nurse training institute in Singapore. It recently announced its FY result - http://infopub.sgx.com/FileOpen/June_201...eID=312850 Results are excellent and the growth momentum continues from 1H 14.

I initiated my position in HMI back in June and steadily added some as the weeks went by. Unfortunately, the strong rally thereafter caught me off guard so I couldn’t fully complete my accumulation. I found the Company interesting then due to the sharp growth in profits in recent years and the under-valuation then with 1H 14 annualized PE < 20 (no longer an issue).

Key Summary:

1) It owns a 49% stake in a matured and profitable Mahkota Hospital generating the lion share of the Group’s profit. It also owns 61% stake in a greenfield Regency Hospital in Johor built in 2009 and registered its first profitable year in 2014. The nursing business has historically been loss making though it registered positive EBIT this year. All 3 business are consolidated at Group level resulting in substantial minority interests.

2) The Group was weighed down by losses from Regency which only broken even in FY 2014. While this wiped out the bulk of the profit from Mahkota initially, the incremental revenue and rapidly narrowing losses can be seen from key ratios like EBIT and EBITDA margins. Hospitals, like many infrastructures, requires a certain number of patients to reach breakeven point and thereafter, with bulk of the cost being fixed, results in incremental profit and margin expansions. This weighed down the Group results till 2012 as the losses from Regency were substantial. From 2013 onwards, Regency broke even in EBITDA terms and this ended the financial black hole.

Group EBIT Margin

2010: 3%
2011: 4%
2012: 7%
2013: 11%
2014: 14% (Regency turned profitable)

3) The Group has a complicating structure with substantial minority interests and associates. There are loans to associates and interest income paid from it. It took me a few days to piece it all together and even then, I still find it confusing. I attribute this to the bumiputera policy restricting foreign ownership ?

4) The Company does not pay a dividend. There is risk of cash being 'stuck' at the operating assets where it does not have a controlling stake albeit it does have managerial control.

5) Gearing levels are low with debt being repaid annually. Bulk of the capex ie Regency development was financed by bank loans and rights issues in the past.

5) The controlling shareholder raised her stake from 39% to 51% via a partial general offer at 16 cents last year. She increased her stake this year with a married deal at 18.0 cents. Judging by the recent results and improving operational outlook, it does seem to be a great deal.

6) With the recent rally, valuation has improved tremendously reaching PE of 29. So the question is whether can the growth in the hospital division be maintained in light of growing competition ?

7) Ultimately a small company operating in a foreign country. The risks are substantial.

I suspect a few buddies do own this company. Personally, I view this as a rapidly growing small cap in the medical sector. It is fairly speculative nonetheless and I won't deem it to be safe or defensive like Raffles Medical. This is in no way a research piece. Would appreciate your views.

(Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#2
http://m.themalaymailonline.com/money/ar...cal-centre

Corporate actions on the core assets of a low profile Msian play...

Speculatively Vested
GG
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#3
Share price made new all time high this week probably fueled by the rumors above. The recent 1H 15 results were outstanding with both revenue and margin expansion. I expect continued profit growth from this small and fairly unnoticed company. Naturally, this is a business in a foreign land with a complex corporate structure so there should be a discount to valuation compared to local healthcare players.

(Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply
#4
There seems to be plenty happening at a really happening Msian healthcare play listed here on SGX. A Bloomberg report emerged followed by a Zaobao article taking about a RM900m or US$250m price tag for 100% stake in Mahkota Medical Centre. Then we have reports from Msian Star that IHH may be an interested buyer for Mahkota. The latest news that emerged is a Bernama report citing the medical centre CEO on RM200m expansion plans by Mahkota.

Here we are hearing nothing from HMI on SGX. Really wondering what is going on... RM900m, RM200m appears nothing substantial on a company which is capitalised S$205m or RM553m?

Speculatively Vested
GG

2 year old factsheet on HMI:

http://hmi.com.sg/wp-content/uploads/HMI...y-2013.pdf

This week we have firstly:

i) http://www.thestar.com.my/Business/Busin...?style=biz

ii) http://www.themalaymailonline.com/money/...cal-centre

iii) http://www.thestar.com.my/Business/Busin...?style=biz

Mahkota draws IHH interest
Saturday, 11 April 2015
BY: DANIEL KHOO



Company said to be interested in buying Malacca hospital

A potential sale of Mahkota Medical Centre has attracted the interest of IHH Healthcare Bhd, sources say.

They say the sale of the hospital could be a good fit for IHH although it would also be subject to the final sale price that would be agreed upon.

“It is an interesting proposition from the sellers, but the price needs to be right as well valuation-wise so that it would be a strategic fit for the company,” they say.

“Prices that are being explored could be lower than the indicative US$250mil (RM912.5mil),” they add.

The Mahkota Medical Centre is a 266-bed hospital located in the heart of Malacca City on Jalan Merdeka and is said to be up for sale, according to Bloomberg.

The potential sellers include Singapore-listed healthcare services provider Health Management International Ltd which owns a 48.95% stake in the hospital but with a control over it.

Health Management is the biggest single shareholder in the 21-year old Mahkota Medical Centre and the hospital’s other two shareholders are also said to be planning to sell their stakes.

In a response to StarBizWeek on whether it was exploring the potential sale of the hospital, an IHH spokesperson said IHH was always looking at various value accretive opportunities to add to its portfolio.

“However, it is not appropriate for us to comment on specific transactions and we will update the market if there are any material developments,” the spokesperson says.

Meanwhile, a spokesperson for TMC Life Sciences Bhd says the company would not be interested in acquiring the Mahkota Medical Centre at this point in time.

“We are not aware of any plans for acquiring Mahkota Medical Centre. I think our plate is presently full at the moment,” the spokesperson says.

TMC, which is 69% owned by Singapore billionaire Peter Lim Eng Hock, had recently announced the RM400mil acquisition of the Thomson Medical Hub in Johor Baru.

Observers say TMC needs time to digest their recent acquisitions and expansion plans for its hospital at Kota Damansara before embarking on a new one and its decision not to pursue Mahkota Medical Centre is a wise one.

“Valuations for healthcare is high at the moment and could remain high as the industry is emerging to be an increasingly necessary part of the economy. More so, healthcare is important to maintain a healthy and functional population to support economic growth,” a healthcare analyst says.

For the Mahkota Medical Centre meanwhile, the said indicative asking price of US$250mil (RM912.5mil) values the hospital at RM3.43mil per bed.

That rate is well above recent historical valuations of comparative hospitals wherein TMC had acquired the Iskandariah Hospital at the Thompon Medical Hub for RM2.6mil per bed.

Time will tell if IHH would eventually acquire the Mahkota Medical Centre but the appetite for hospital assets seems to be as strong as ever and their present owners could be taking the opportunity to cash out at high valuations.

“While the Mahkota Medical Centre is an immediate cash generating asset, it would need to be seen if some of its assets have reached the end of their lifecycle given that the hospital has been operating for two decades. The purchasers would need to take this into account into their valuations,” an analyst says.

IHH already has a presence in Malacca through the 250-bed Pantai Hospital Ayer Keroh that is located some 10km away from the Mahkota Medical Centre.

Pantai Hospital Ayer Keroh was established in 1986 and is located away from the touristy area of Malacca where the Mahkota Medical Centre is situated.

Then we have the latest RM200m expansion news on its 48.95% owned Mahkota Hospital, Melaka (presumably on 160k sf space of land):

http://www.bernama.com.my/bernama/v8/bu/...id=1125459

Mahkota Medical Centre Melaka To Invest RM200 Million On Hospital Expansion
By Christine Lim

KUALA LUMPUR, April 12 (Bernama) -- Mahkota Medical Centre Melaka, the largest private hospital in the southern region of Peninsular Malaysia, is investing about RM200 million to build a new 500-bed hospital block.

Chief Executive Officer Stanley Lam said the new block, on a parcel of land adjacent to the existing 270-bed hospital building, will be ready in two to four years.

"The new building will cater to the growth in the number of patients every year," Lam told Bernama in an interview recently.

Lam said Mahkota Medical Centre Melaka, owned by Health Management International Ltd (HMI), a company listed on the Singapore Exchange, has more than 300,000 patients annually of whom more than 30 per cent are foreigners, mainly from Indonesia.

"Every year our patient numbers increase by more than six per cent. There has been an increase in medical tourism in Malaysia, which can provide equally good medical treatment at a fraction of cost compared to Singapore," he said.

The Centre, with its niche in the middle income group, has seen a steady increase in annual revenue of more than 10 per cent with the expansion of medical tourism in the country and as more patients seek specialised services, he said.

The growth in medical tourism and health care services will continue despite rising health care costs, he said.

"Consultancy fees and staff costs are also expected to rise substantially due to the limited talent pool in the healthcare industry," he said.

-- BERNAMA
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#5
It has been coming to a month since news of a potential sale of HMI's major asset is up for sale... there have been developments and apart from continued updates from major media, there is no updates on the part of HMI and let alone any clarifications sought by SGX... what is happening... who is sleeping?

Vested
GG

http://www.bloomberg.com/news/articles/2...n-hospital

HH, Sime Darby Said to Make Bids for HMI Malaysia Hospital
by Joyce KohElffie Chew
3:21 PM SGT
May 6, 2015
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IHH Healthcare Bhd. and Sime Darby Bhd.’s medical venture made offers for a Malaysian hospital owned by Health Management International Ltd., people with knowledge of the matter said.
The two companies submitted first-round bids for the Mahkota Medical Centre in the state of Malacca, the people said, asking not to be named as the process is private. Health Management, which is listed in Singapore, is working with Credit Suisse Group AG to sell the hospital for about $250 million, people with knowledge of the matter said last month.
The bidders aim to boost growth by buying a hospital that provides specialist services including chemotherapy day care and in-vitro fertilization, drawing more than 287,000 patients last financial year. Aging populations and a burgeoning middle class are boosting health-care spending in Asia Pacific, which is projected to increase 10.5 percent annually to reach $2.2 trillion by 2018, according to Frost & Sullivan.
Health Management shares jumped as much as 11 percent and were up 9.2 percent at 4:38 p.m. in Singapore.
Revenue at the 266-bed Mahkota, which opened in 1994, rose 11 percent to 212 million ringgit ($59 million) in the year through June 2014, according to Health Management’s annual report. The hospital, located about 120 kilometers (75 miles) southeast of Malaysia’s capital, has offices in Indonesia, Cambodia and Singapore to attract patients from overseas, its website shows.
Sime Darby, the world’s largest listed palm oil producer by market value, bid through its 50-50 medical joint venture with Australia’s Ramsay Health Care Ltd., the people said. The business operates three medical centers each in Malaysia and Indonesia, according to its website.
Blocked Purchase
IHH said in an e-mailed statement it’s “always looking” at opportunities to add to its portfolio and won’t comment on specific transactions. A spokesman for Sime Darby said the company is always seeking ways to create value for shareholders and wouldn’t comment further. A representative for Ramsay declined to comment while Health Management didn’t immediately respond to a request for comment.
Health Management owns 48.95 percent of Mahkota, according to its annual report. The hospital’s other shareholders also plan to sell their stakes, people with knowledge of the matter said last month.
IHH, the biggest health-care provider in Asia, bought control of India’s Continental Hospitals Ltd. for 2.8 billion rupees ($44 million) in March, after its proposed S$137 million ($103 million) acquisition of diagnostic imaging provider Radlink-Asia Pte was blocked by Singapore’s competition regulator.
Last year, IHH dropped plans to bid as much as A$5 billion ($4 billion) for Healthscope Ltd. as the Australian health-care provider’s owners veered toward an initial public offering, people familiar with the matter said. The Kuala Lumpur-based company is seeking more acquisitions in China and India, even as it focuses on expanding its Singapore and Malaysia operations, Chief Executive Officer Tan See Leng said in a September interview.
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#6
Health Management International Ltd (“HMI”) notes recent media reports that it has received
offers for Mahkota Medical Centre (“MMC”) in Malacca, Malaysia. HMI confirms that it has
received non-binding expressions of interest for MMC.

HMI continually explores and reviews its strategic options with respect to its healthcare business,
including considerations relating to a potential sale of MMC. HMI has not made any definitive
decision with respect to, and has not entered into any definitive agreement for, a potential sale
of MMC. There is no assurance that any definitive agreement for the sale of MMC will be
entered into. HMI believes it is not in the interests of HMI or its shareholders to comment
publicly on HMI’s considerations with respect to MMC.

HMI shareholders are therefore advised to exercise caution when dealing in their shares and
other securities. HMI will release a further announcement if and when there are any material
developments.

By Order of the Board
Dr Gan See Khem
Executive Chairman and Managing Director
7 May 2015

http://infopub.sgx.com/FileOpen/HMI_Anno...eID=348663

(Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#7
Finally, after hearing little birds feeding the major media over the sales process, we have some sort of admission from management. However, the statement leaves shareholders no better and clearer in terms of evaluating their position. No wonder extreme caution must be adopted by shareholders with regards to their position in HMI.

Vested
GG

(07-05-2015, 09:44 PM)Nick Wrote: Health Management International Ltd (“HMI”) notes recent media reports that it has received
offers for Mahkota Medical Centre (“MMC”) in Malacca, Malaysia. HMI confirms that it has
received non-binding expressions of interest for MMC.

HMI continually explores and reviews its strategic options with respect to its healthcare business,
including considerations relating to a potential sale of MMC. HMI has not made any definitive
decision with respect to, and has not entered into any definitive agreement for, a potential sale
of MMC. There is no assurance that any definitive agreement for the sale of MMC will be
entered into. HMI believes it is not in the interests of HMI or its shareholders to comment
publicly on HMI’s considerations with respect to MMC.

HMI shareholders are therefore advised to exercise caution when dealing in their shares and
other securities. HMI will release a further announcement if and when there are any material
developments.

By Order of the Board
Dr Gan See Khem
Executive Chairman and Managing Director
7 May 2015

http://infopub.sgx.com/FileOpen/HMI_Anno...eID=348663

(Vested)
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#8
good call! hope the deal goes through! Big Grin
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#9
There are 577 million shares outstanding. Assuming the media articles prove to be true and they do succeed in divesting the hospital at US$250 million, their 48.95% stake works out to S$163 million or 28 cents per share. The remaining assets will be the new and rapidly growing Regency Hospital in Johor (turned profitable in FY 2014) and the education business in Singapore. Let's see what happens in the coming weeks.

(Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
Reply
#10
HMI reported its first ever quarterly result as its market capitalization has greatly expanded over the past 2 years in line with its improving operating results.

http://infopub.sgx.com/FileOpen/HMI_Fina...eID=349362 [3Q Results]

1) As earlier posted, HMI consolidates its 3 key operations - Makhota Hospital, Regency Hospital and Education business into its financial statement despite substantial minority interests i.e it owns 48.95% of MH and 61% of RH. The Company continues to maintain its multi-year stellar growth with topline growing by 20% in 3Q 2015 driven primarily by the hospital contributions. This is likely due to Regency Hospital which have been reporting high double digit CAGR since it began operation in 2009 and turned profitable in FY 2014. Mahkota is a matured hospital generating steady growth too.

2) What is impressive is that they managed to grow their gross and ebitda margins in 9M 2015 to 30.5% and 20.7% respectively. This is due to the business model where there are substantial fixed operating cost i.e. depreciation and rentals. Unfortunately, no breakdown of the revenue contributions from each hospital was given - this will only be revealed in the Annual Report.

3) Company reported strong profit growth to 19.8 million in 9M 2015 - already exceeding FY 2014 NPAT figures by a large margin. The annualized EPS is 1.7 cents which works out to a PE of 22. If the Company can continue to maintain the impressive revenue growth, I expect strong profit growth to be maintained. The Company has highlighted increased competition in Malacca so this could curtail Mahkota growth in the future.

4) Company continues to repay its debt with its net debt being reduced from 29 million to 4.8 million RM. There was an asset restructuring involving the associates (which owns the properties) and the receivables (payment for the lease). I suspect this could be due to the potential sale of Mahkota Hospital. It is likely that the Group will be net cash by year end.

(Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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