Photos by Sim Kih
ABOUT 50 NextInsight readers spent last Saturday (Aug 11) morning at Healthway Medical in TripleOne Somerset -- and were rewarded with insights into the good growth potential of the company which already operates the largest network of medical centres and clinics in Singapore.
It has 110 clinics, including 12 dental clinics, mainly in the heartlands.
Its other clinics are in major private hospitals, such as Gleneagles and Mount Elizabeth, where it rents suites for its doctors to work from.
Healthway is the largest private employer of doctors and specialists in Singapore. The figure: More than 350.
The following are key takeaways from a business presentation by Healthway Medical's President, Lam Pin Woon, and a Q&A session with readers:
> Revenue: Healthway's core revenue is derived from its Primary Care Division. Besides walk-in patients, this division has big corporate customers, including Sony, Renesas Semiconductor Singapore (formerly known as NEC) and Proctor & Gamble, whose staff visit its clinics.
As compared to specialist services, primary care services account for about 70% of Healthway's revenue.
However, specialist services (such as paediatrics and orthopaedics) are growing faster.
In 1H2012, Healthway's total revenue amounted to $46 million, a 8.7% y-o-y increase.
Group net profit for 1H was $3.75 million, a 49.7% jump.
> What is 'staff secondment'? Healthway's $46 million revenue in 1H2012 includes $5.6 million 'other operating income' which is largely its management fee (also known as staff secondment costs).
There was heightened investor interest in, and questioning on, this 'staff secondment'.
What's it about? It's a fee Healthway collects for operating 25 clinics in Singapore which are owned by a third party who is an investor.
The management contract started last year.
Is the revenue recurring? Answer: Yes, the contract is for an intial three years. The monthly fee is 6 figures or a percentage of revenue, whichever is higher.
> Healthway Mobile: This division was started last year by Mr Lam after he joined the company in Jan 2011.
Its main client currently is the Singapore Police Force, whose 7-figure annual contract requires Healthway Medical doctors to turn up, sometimes at odd hours, to test people who have been arrested for drink driving or drug consumption.
Another client is the Singapore Civil Defence Force.
Healthway also despatches its doctors daily for checks of patients at Kwong Wai Shiu Hospital, which does not have a full-time medical team. Healthway Medical will also respond to emergency cases at that hospital.
Reflecting the vast potential of this 'asset-light' business, Mr Lam said its internal target is for this mobile business to earn $20 million in annual revenue by 2017.
> Managing medical assets for HMD: Here is a potential growth driver for Healthway's revenue. Healthway has a 25% stake in Healthway Medical Development (HMD) which is building up its portfolio of medical-related assets outside of Singapore.
Healthway Medical will have the first right of refusal to manage HMD's assets.
The other shareholders of HMD are major shareholders of Healthway Medical. (For more info: HEALTHWAY MEDICAL: Stronger outlook ahead)
> Doctor turnover: Asked about this, Mr Lam said turnover is 'very low' at 10-15% as senior management has fostered a positive culture in the company to retain talent.
In the market, it is well-known that doctor turnover was much higher in 2009 and 2010 with the expiry of binding contracts of a number of doctors/specialists, who had sold their businesses to Healthway in the run-up to its IPO in 2008.
Asked about doctor remuneration, Mr Lam said it is based on a fixed salary with a variable incentive which depends on the patient load handled.
> Sunrise industry: Private healthcare demand is rising with an ageing population, more inflow of immigrants into Singapore, rising affluence in Singapore and neigbouring countries, and the Community Health Assist Scheme, among other factors.
Specific niches with lots of growth potential include medical aesthetics, weight loss, dermatology.
1. The premises of all Healthway clinics are rented, so they are subject to rental increases. In one case, the landlord asked initially for a $22,000 monthly rental, then upped it to $24,000 and then $26,000, saying each time that there were interested parties at those levels. Eventually, Healthway moved out to another shop unit a few doors away for $15,000. It's a smaller unit.
2. Other challenges facing Healthway are an acute shortage of doctors and rising wage pressure.
3. Healthway has launched a co-branded credit card with Bank of China: When you sign up for a BOC-Healthway credit card, you will get a free health screening paid for by the bank. Bank of China has 20 miilion card holders in China to whom Healthway can be promoted.
4. Healthway has 10 clinics in China, targeting the upper mid-tier market.
5. Healthway has S$5 million cash and loan receivables of $15 million. Healthway expects to collect the $15 million this year.
The invite to the event was > HEALTHWAY MEDICAL: 'Come visit us, get to know our biz and ...do lunch'