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Malaysia: Growth of Private Health and Social Sector

Malaysia’s private healthcare and social work services sector has been growing by leaps and bounds, the Department of Statistics 2016 Economic Census revealed.
The country has some 14,930 private establishments providing general and specialised medical services, dental services, hospital services, dialysis centres, child day-care, residential care and maternity homes among others, in 2015.
These establishments contributed RM16.8bil to Malaysia’s economy in 2015, compared to RM10.4bil from 9,152 such establishments in 2010.
Some 121,088 people were employed in this sector in 2015, out of which 88.5% are full-time employees, 2.2% are paid part-time employees while the remaining 9.3% are owners or unpaid family workers.
Female workers outnumbered male wor­kers in all qualifications, except at the post-graduate level where more men (5,000) were employed than women (2,874). 
Most health and social workers possessed at least an SPM or SPM (V) certificate (26.5%), diploma qualification (28.7%) or advanced diploma or Bachelor’s degree (23.8%). Only 2.6% or 3,222 of the workers had below SPM or SPM (V) qualification.
Overall the workers took home RM3.68bil in salaries and wages in 2015, compared to RM2.1bil in 2010.
Employees in private hospital services topped the salary list at RM1.84bil in 2015, followed by employees in general medical services at RM737mil and specialised medical services at RM300.6mil.
The average monthly salary in the private health and social work services sector in 2015 was RM2,795.
Employees serving in specialised medical services recorded the highest average monthly salary at RM3,352, followed by hospital services at RM3,317 and medical laboratories at RM3,065.
Selangor has the highest number of esta­blishments providing health and social work services at 3,883, followed by Kuala Lumpur at 2,299 and Johor at 1,713 in 2015.
Women-owned establishments in this sector also increased from 3,122 in 2010 to 4,699 in 2015.
The highest increase in the number of women-owned outfits between 2010 and 2015 was recorded in child day-care activities (784), other human health services (172) and residential care activities (138).
theSTAR 19-10-2017

Disclaimer: Views or opinions expressed are solely those of the Author and should be used with discretion. The Author shall not be held liable for any acts or omissions arising from the use of the information. The user will be personally liable for any damages or other liability arising hereof.

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Hovid Bhd: Privatisation

Major shareholder David Ho Sue San, working with private equity (PE) firm TAEL Two Partners Ltd, have made a general offer for Hovid shares at 38 sen apiece in a bid to take the company private.

The exercise sees a special vehicle called Fajar Astoria Sdn Bhd, set up by TAEL to undertake the offer with Ho. TAEL is part of the TAEL Partners group, established in 2007 as a South East Asian-centric PE firm.

The takeover offer will also involve Ho and Fajar Astoria buying up the group’s outstanding five-year warrants at 20 sen per warrant.

Based on Hovid’s announcement on Monday, Ho, who is also the chairman and managing director, holds a 33.72% stake or 276.80 million shares and 43.57% or 140.39 million warrants in Hovid.

The offerors are proposing to buy 181.84 million units of the outstanding warrants, which represents about 56.43% of the total warrants.The warrants expire on June 5, 2018 and have an exercise price of RM0.18 per warrant.

Going back to the buyout offer, the condition of 90% acceptances means this: Ho will need acceptances of 90% of the 66.28% of Hovid shares he does not own. This translates into a total of 59% holding of the company (which works to around 484 million Hovid shares) accepting Ho’s offer.

Hence the takeover offer will fail, if Ho does not achieve this level of acceptances. However, it is interesting to note that the offerors have also stated that they reserve the right to review the level of acceptance to less than the 90% level. It will be interesting to see if they lower the condition at some point during the life of the offer.

Ho, a pharmacy graduate, is also the founder of Hovid. He took over his father’s herbal tea business. The business flourished until he bought over a building in Ipoh and named it Ho Yan Hor Medical Hall. This was later renamed as Ho Yan Hor Sdn Bhd and today it is known as Hovid Bhd.

Aside from generic drugs and dietary supplements under its own Hovid brandname, the company also does contract manufacturing for other drugmakers. About 95% of its revenue is said to be derived from the Hovid brand name.

He later founded another company called Carotech Bhd, which went public on Bursa Malaysia’s Mesdaq market, now known as ACE Market, in 2005.

The Ipoh-based Carotech specialised in extracting tocotrienol (vitamin E) from crude palm oil and became well-known globally, conquering about 80% of global palm vitamen E market share. But Carotech’s fortunes dwindled and was delisted on May 11, 2012 for failing to submit its regularisation plan to Bursa Securities for approval within the stipulated time.

A series of events took place after this where Ho and other directors at Carotech and Hovid were publicly reprimanded by the authorities for breaching listing requirements with regard to both companies’ financial results.

So why does Ho want to privatise Hovid? The offerors did not indicate the rationale for the privatisation.

Nevertheless, it is pertinent to note that Hovid had slipped into the red in financial year ended June 30, 2017 (FY17).

The company posted a net loss of RM1.53mil from net profit of RM17.9mil, against a 10% drop in revenue at RM169.94mil from RM189.03mil. It has RM15.9mil in cash, with debt of RM65.6mil as at June 30, 2017.

The earnings, according to Hovid, was dragged by the disruption in manufacturing activities arising from the revocation of its manufacturing licences of two plants. This subsequently affected its sales volume and led to higher operating costs from improvements on quality systems and production processes.

Hovid’s manufacturing licences of two plants were revoked after an audit by the National Pharmaceutical Regulatory Agency (NPRA) revealed that its Pharmaceutical Quality System were not in compliance with the latest Good Manufacturing Practice. The revocation of licence was linked to Hovid recalling its hypertension pills, Ternolol 50mg on Jan 5, which triggered the audit by the NPRA.

Hovid’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin also suffered for the fourth quarter FY17, shrinking to a mere 4.2%, from fourth quarter of FY16’s 13.5%.

The company managed to obtain the license for its Chemor plant in May, but the other plant requires some physical changes, according to reports.

At the current share price of 36 sen, just two sen short of the offer price, Hovid is trading at a forward price-to-earnings ratio of 21.18 times.

Hovid’s 52-week high of 38 sen was about a year ago on Oct 14, 2016, while its 52-week low was on Jan 10, 2017 at 24 sen. However, its highest was last seen on April 21, 2015 at 53.7 sen. The stock has risen 16.13% from Oct 3rd’s 31 sen, before Hovid’s privatisation announcement.

In terms of assets, Hovid has about 16 properties and land worth some RM33mil, with the bulk last valued in June 2016. Of these, the ones valued the most include its Chemor plant and research and development centre worth RM27.15mil, a RM13.22mil pharmaceutical factory and office building in Ipoh and seven parcels of vacant land also in Ipoh worth RM11.5mil.

A month ago, CIMB Research maintained its “hold” rating on the stock, with a higher sum-of-parts based target price of 34 sen. The house cut its FY18-19 estimates by 16.3%-27.6% to account for lower production volume and further delays in the Chemor plant extension. The research house said Hovid was facing labour shortages that resulted in its less than optimal production volume.


Disclaimer: Views or opinions expressed are solely those of the Author and should be used with discretion. The Author shall not be held liable for any acts or omissions arising from the use of the information. The user will be personally liable for any damages or other liability arising hereof.

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Hep C: Time bomb - only about 10% of carriers identified

Only about 1in 10 Malaysians who carry the Hepatitis C virus (HCV) has been diagnosed with the potentially fatal liver disease.

“The diagnosed cases are only the tip of the iceberg,” said Prof Dr Rosmawati Mohamed, hepatologist at University Malaya Medical Centre (UMMC). 

She said that worldwide, only about 15% of HCV cases are diagnosed, compared with 10% in Malaysia. 

The majority of cases go undiagnosed because of the asymptomatic nature of the disease, where symptoms do not show themselves, she said at the launch of the At the Edge of a Miracle: The Hepatitis C Epidemic in Malaysia report on Thursday.

The report by the Malaysian Aids Council (MAC) was launched in conjunction with World Hepatitis Day which falls on July 28 every year.  

It is estimated that 435,000 to 500,000 Malaysians carry the virus, a number derived by MAC’s modelling of data provided by the Ministry of Health.  

MAC honorary secretary Hisham Hussein said the prevalence of HCV among those who inject drugs was estimated at 50% to 67%. 

“Given the overlapping modes of transmission, HIV-HCV co-infection – particularly among those who inject drugs – is a significant public health concern,” he said.  

He said that a study in 2009 conducted among 552 drug users, who were not undergoing treatment, found that 65.4% of them had HCV.  Out of those, about 40% of them were also diagnosed with HIV.  

According to the World Health Organisation, a significant number of those chronically infected will also develop liver cancer.

/theSTAR 27-07-2017
Disclaimer: Views or opinions expressed are solely those of the Author and should be used with discretion. The Author shall not be held liable for any acts or omissions arising from the use of the information. The user will be personally liable for any damages or other liability arising hereof.

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Hepatitis C: Generic licensing agreement to Malaysia

More Hepatitis C patients will soon be able to afford treatment..

Gilead Science, an American research-based biopharmaceutical company, announced its decision on August 24, 2017 to expand its HIV and Hepatitis C generic licensing agreement to Malaysia, Thailand, Ukraine and Belarus.

Hailing the development, local think-tank Galen Centre for Health and Social Policy said it would be a “game changer” in the fight against Hepatitis C in the country.

Its chief executive officer Azrul Mohd Khalib said more than 400,000 Malaysians between 15 and 60 years old are currently estimated to be living with Hepatitis C.

“With Hepatitis C treatment currently costing as much as US$30,000 (RM128,115) per person, this granting of a Sofosbuvir voluntary licence by Gilead Sciences will mean that it will be possible for lower-cost generic versions of this life-saving drug to be made available in Malaysia. It will allow for the drug to be used in combination with others. Most importantly, it will be possible for thousands of lives to be treated and cured of this disease,” he said.

Sofosbuvir is the innovator drug owned by Gilead Sciences.

Azrul also hoped that with access to the drug, the Health Ministry would be in a better position to work together with non-governmental organisations, patient groups and the pharmaceutical sector towards achieving its goal of ensuring that those in need of Hepatitis C treatment “can get it and afford to do so”.

Previously, The Star reported that it may cost up to RM300,000 for patients to have a full course of treatment. This was because Malaysia was not given special pricing for the drugs by pharmaceutical companies as it is considered as a middle-income nation.

In July, the Health Ministry acknowledged that the treatment for Hepatitis C is very expensive and it was collaborating with other partners to find an affordable cure. It was previously reported that the Health Ministry has teamed up with the Drugs for Neglected Diseases Institute to come up with an affordable cure.
/theSTAR 05-09-2017

Disclaimer: Views or opinions expressed are solely those of the Author and should be used with discretion. The Author shall not be held liable for any acts or omissions arising from the use of the information. The user will be personally liable for any damages or other liability arising hereof.

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Medical and Dental Clinics - Numbers

The closure of over 600 private general and dental clinics in Malaysia since 2014 is not solely due to lack of business or poor reception from the public, the Health Ministry said.

Deputy Minister Datuk Seri Dr Hilmi Yahaya said only 78 of 9,155 registered clinics and three of 2,435 dental clinics had shut down due to economic reasons.

Between 2014 and June 2017, 643 private general clinics and 139 dental clinics have been deregistered.

However, 1,289 new private general clinics and 527 dental clinics were registered in the same period, so this means there was no issue of too few private clinics.

As per the law, registered private clinics must apply to the Ministry if they wish to deregister, and must also state the reason for the application.

Dr Hilmi said 39.5% of private general clinics and 53.3% of dental clinics which applied for deregistration said they were changing the location of their premises.

/theSTAR 10-08-2017

Disclaimer: Views or opinions expressed are solely those of the Author and should be used with discretion. The Author shall not be held liable for any acts or omissions arising from the use of the information. The user will be personally liable for any damages or other liability arising hereof.

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CCM: "De-gear" & Demerge

Chemical Company of Malaysia Bhd’s (CCM) defended the company’s demerger exercise as one that will not result in any losses to shareholders.

CCM group managing director Leonard Ariff Abdul Shatar acknowledged that it would take time for the market to digest the recently announced corporate exercise to de-gear and demerge from its profit-making pharmaceutical unit CCM Duopharma Biotech Bhd.

“We believe it will take time for the market to fully comprehend the corporate exercise because it involves a lot of moving parts. But our message is, shareholders will not lose out,” he said.

However, CCM’s shares fell 12 sen, or 7.1%, yesterday to close at RM1.57, effectively wiping out RM54.5mil from the company’s market capitalisation. CCM Duopharma’s shares, on the other hand, closed unchanged at RM2.11 yesterday.

A dealer reckoned that some shareholders did not like the dilutive aspect of the deal, as it involves a placement exercise. Others, the dealer said, could be selling on a knee-jerk reaction to the share consolidation element in the proposal.

Leonard Ariff pointed out that under the demerger exercise, entitled CCM shareholders – institutional and retail – would effectively get CCM Duopharma shares for free. The subsequent exercise to consolidate CCM shares from three to one, on the other hand, would ensure that the value of the company’s share remains intact.

“For investors who buy into CCM before the close of our book-building exercise, they will be getting CCM Duopharma’s shares for free,” he said.

On that note, he pointed out that shareholders who had previously bought into CCM for “cheaper” exposure to CCM Duopharma would now benefit through direct shareholding in the latter. “This means the dividend from CCM Duopharma will flow directly to them post-demerger without dilution through CCM,” Leonard Ariff said.

“The exercise to subsequently consolidate CCM shares from three to one is to ensure that they don’t lose any value, as the shares will effectively be based on the net asset of the reduced size of the company following the demerger exercise,” he added.

At present, Permodalan Nasional Bhd (PNB) owns about 70% of CCM, which, in turn, has a 73.4% stake in CCM Duopharma.

The proposed demerger announced on Wednesday would see CCM distribute its entire 73.4% stake in CCM Duopharma to its shareholders.This exercise would also involve a capital reduction in CCM’s share capital by about RM462.9mil. CCM announced that it would consolidate its shares on the basis of three to one. This exercise is expected to be completed by January 2018.

In addition, CCM also announced a de-gearing initiative, involving a plan to raise up to RM257.6mil through a private placement of up to 10% of its share capital and the disposal of three parcels of land measuring 70.93 acres in Shah Alam, Selangor. The proposed disposal of the Shah Alam land was deemed a divestment from its non-core assets.

According to Leonard Ariff, CCM expects to raise another gross proceeds of around RM65mil from the sale of its two other identified non-core assets, namely, the Nilai Industrial Land and the group’s 8.45% equity stake in Korea-listed PanGen Biotech Inc.

He said the imminent sale of the Nilai Industrial Land, which could raise about RM20mil based on the current book value, would be conducted through a tender process. Further announcements on the sale would be made by year-end.

As for the proposed sale of CCM’s stake in PanGen, which could raise about RM45mil, Leonard Ariff conceded that while the group had yet to identify a potential buyer, a deal could be concluded by next year.

He pointed out that the sale of the company’s non-core assets is part of a continuous de-gearing exercise to strengthen the group’s balance sheet.

“We will continue to divest from our non-core assets, which we define as those that do not give us revenue of income or dividends, until we achieve a healthy gearing... in absolute terms, our target is to reduce our total loans down to around RM100mil from the current level of RM440mil,” he added.

Under the proposed corporate exercise announced on Wednesday, CCM would undertake a private placement of up to 10% of its issued share capital and dispose of its three parcels of leasehold land measuring up to 70.93 acres in Shah Alam, Selangor, as part of a de-gearing exercise.

Leonard Ariff said CCM’s de-gearing exercise would result in substantial savings for the company.

“At present, we pay RM21mil annually in interest costs to service our debts; post de-gearing exercise, our interest costs would only be a quarter of that,” he pointed out.

CCM’s proposed private placement, which is scheduled to complete in October this year, is expected to raise up to RM67.6mil, while the disposal of land in Shah Alam, which is scheduled to complete in March 2018, to an independent third party would be at a cash consideration of RM190mil.The total proceeds from the fund-raising exercise and land sale would mainly be used to repay CCM’s borrowings.

Meanwhile, CCM’s proposal to distribute its entire 73.4% stake in CCM Duopharma to its shareholders - a move that would result in the demerger of the two companies – would allow the group to focus on managing the growth of its chemical products and polymer coating businesses. The exercise would benefit CCM’s shareholders by enabling them to participate directly in the equity of CCM Duopharma at no cost.

“The initiatives are a continuation of our strategic review which commenced in 2015 to house all of our pharmaceutical businesses under the CCM Duopharma umbrella, to exit from non-performing business segments, and strengthen our balance sheet to enable ample agility to pursue our capital expansion and a sustainable growth strategy for the future,” Leonard Ariff said.

“The proposed initiatives will lighten the balance sheet for CCM and give shareholders direct ownership in both CCM and CCM Duopharma, and participate directly in the growth of the two separate entities. It is expected that the restructuring will enable us to utilise our resources more effectively and efficiently, and promote strong growth for our chemicals and polymer businesses. It is part of CCM’s continuous effort to strive towards sustainability and achieve optimum development in moving forward and growing within a competitive business environment,” he added. 

/theSTAR 04-08-2017

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KPJ: To Expand locally before going Abroad

KPJ Healthcare Bhd will cap future dividend payouts at maximum of RM 80mil of its net profit to allocate more cash for the repayment of its borrowings, executive director Aminudin Dawam said.

“Our dividend payouts have always been around 40%-50% of net profits, so our Board has advised us to put a cap in absolute terms of up to RM 80mil payout,” Aminudin said on the sidelines of the Invest Malaysia conference.

“Now we are paying about RM 70mil to RM 80mil a year and we will continue with this.“If our net profit is more than this, then it will still be capped at up to RM 80mil and the excess profit, which we are confident of growing, will be used to offset our debt,” he added.

The largest public-listed hospital group by bed-count in Malaysia said the employment of a high gearing strategy is to help it to grow further.

“This is how we expand and we have done this before. There have been some lean years too. For the last seven to eight years, dividends have been around 50% although there is no formal dividend policy by the company,” its general manager of investor relations Khairul Annuar Azizi said.

KPJ also plans to spend some RM 1.4bil in capital expenditure (CAPEX) within the next five years to increase its bed-count from 3,000 now.

“Our plan is to add another seven hospitals and these will add another 1,000 beds to the group. Meanwhile, some of our existing hospitals will expand their capacity and this will add another 500 beds,” Aminudin said.

The seven new hospitals will be located in Perlis, Johor, Sarawak, Negri Sembilan and Selangor.

“We are in the midst of an aggressive expansion in Malaysia and we don’t want to overstretch ourselves (abroad) at the moment,” he said.

Overseas expansion, if any, would be through brownfield acquisitions, with Indonesia being the main target market.

Total capex allocated for this year is RM350mil, he added.

On the weak ringgit, he said KPJ had to pass on the additional costs arising from higher prices of imported equipment to its patients.

“As a private profit-generating company, we have to do this but we also have economies of scale, so this amount is controlled. We are doing our best to be more efficient in other areas – in how we do business and in other processes,” he added.

/theSTAR 27-07-2017

Disclaimer: Views or opinions expressed are solely those of the Author and should be used with discretion. The Author shall not be held liable for any acts or omissions arising from the use of the information. The user will be personally liable for any damages or other liability arising hereof.

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