Vietnam has a population of about 86 million and is the world's 13th most populous nation.
The number of births there is 25 times that of the ~40,000 births in Singapore, which remains Thomson’s sole catchment area until Sept.
Hanh Phuc International Women and Children Hospital is located about half an hour from Ho Chi Minh city and is Thomson’s first overseas venture.
It has 260 beds (compared to 190 beds at Thomson Medical Center in Singapore) and will be opened in phases. For a start, Thomson Medical Centre will collect a management fee and a share of the revenue and profit. It has an option to take up an equity stake of up to 25%.
The management is also on the look out for sites in Hanoi to build their second hospital under the same consultancy contract as well as strategic partnerships in Malaysia.
In Singapore, Thomson has the largest share of the private obstetrics and gynecology (O&G) hospital service market. It delivers over 20% of babies born here.
Last week, it announced year-on-year growth of 17.7% in its 1H10 revenues to reach S$37.7 million for the first half ended Feb 2010.
Net earnings were up 22% at S$7.2 million while profit after tax margin was 19.1%.
An interim dividend of 1.2 cents a share was declared, which is about 50% of its earnings.
The stock closed at 70.5 cents on Mon, after DMG-OSK maintained its “Buy” call on the stock with a target price of 78 cents. AmFraser Securities gave an “Accumulate” rating with a price target of 77 cents.
Hospital operations & ancillary services contributed about 74% to its 1H10 top line while specialized services contributed the remaining 26%.
Hospital operations comprise of:
1) Provision of integrated medical healthcare facilities and services for primary, secondary and tertiary healthcare with focus on women and children’s health.
2) Rental of medical suites and retail space within the hospital mainly to O&G and pediatric specialists.
3) The ancillary services include fetal assessment services, diagnostic laboratory services, diagnostic imaging services, anti-aging services, health screening services and parent craft services such as childbirth education, childcare education, breast-feeding counseling and home care nursing.
Specialized services refers to:
1) Thomson Women’s Clinics (TWC) - operation of 7 specialist O&G clinics in the heartlands. This contributed S$5.4 million or 14% to group revenues.
2) Thomson Women Cancer Center (TWCC) – This commenced operations on 28 Feb 2009 and contributed S$1.4 million or 3.6% to group revenues.
3) Thomson Pediatric Center (TPC) - This commenced operations on 1 Jan and contributed S$1.0 million or 2.6% to group revenues.
Another S$2.2 million flowed in from:
4) Fertility treatment under Thomson Fertility Centre and cytogenetic laboratory services which helps its specialists determine the well-being of the fetus under Thomson Pre-Natal Diagnostic Laboratory.
5) Provision of hospital consultancy and management consultancy services under Thomson International Health Services and aesthetic services under Thomson Aesthetics Centre.
Last week, Thomson Medical Centre CEO Allan Yeo and his senior management met with analysts and fund managers. Here is a summary of some of the Q&As:
Q: What is your pricing in Vietnam?
Mr Yeo: We are benchmarking ourselves to be slightly higher than Franco-Vietnamese Hospital, which provides healthcare services of international standard at prices acceptable in Vietnam.
Q: Is the 5+5-year management contract for Han Phuc hospital extendable?
Mr Yeo: We will take the first 3 years of operation to decide whether we want to take up our option for a 25% stake at founder’s price. Thereafter, let's say something goes wrong and Protrade wants to pull out from healthcare - although we don't see it happening as they are a serious player. We have an option for them to buy us out at market valuation.
Q: What currency is the contract denominated in?
Mr Yeo: They will pay us in USD.
Q: How much did the land cost?
Mr Yeo: The land is leased to Han Phuc hospital by Protrade at a nominal rate.
Q: Why haven’t you embarked on in-vitro fertilization (IVF) services in Vietnam given the chairman’s reputation in this area?
Mr Yeo: There is a shortage of IVF doctors in Vietnam. We have identified an O&G specialist and an embryologist for this, but we don’t want to poach these 2 doctors when they are still critical to the provision of medical services in their current fields.Q: Why are you keeping so much cash (S$20 million) when your capex is as low as S$6 million to S$7 million a year?
Mr Yeo: The monies will come in handy in our expansion plans and other business opportunities that present itself in the future. For our immediate expansion plans, we are building another 2 operating theatres, 2 delivery suites and a day surgery center in Singapore by the first quarter of FY2011 (Nov 2010) in the hospital. On an ongoing basis, we will also continue to look into increasing our network of satellite women's clinics in Singapore heartlands.
Q: Will you set up a second hospital in Singapore?
Mr Yeo: That is unlikely at the moment, because not only is land limited and very expensive in Singapore, obtaining the necessary land use rights from the URA is very complicated.
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