TMC Hospital: to increase hospital beds

NICHE hospital operator TMC Life Sciences Bhd is increasing the number of beds at its sole Kota Damansara hospital by 60 to 200 by the end of its financial year 2016 ending May 31 (FY16).

It is also exploring an expansion in the future as it only occupies a third of the 6 acres available at its present hospital site.

In terms of hostpital beds, TMC rates as one of the smallest of private hostpial groups, behind parties like the Ramsay Sime Darby (with total number of beds at 913 in Malaysia), Sunway Medical Centre (368 beds) and IHH Healthcare Bhd (about 2,000 beds in Malaysia).

TMC, is also presently the smallest capitalised public listed hospital operator in the country and has a market cap of RM389.2mil, behind other public listed peers as KPJ Healthcare Bhd with RM3.56bil and IHH RM38.35bil.

TMC, which spent RM3.3mil on capital expenditure (capex) last year, is looking to spend more this year and next as it seeks to replace old machinery and renovate one of its floors.

“Our capex for FY15 will be funded internally and will go up (from FY14) although we don’t have the details yet. We have been operating for five and a half years. Some medical equipment have to replaced after six to eight years of use,” TMC’s executive director and group CEO Dr Wong Chiang Yin tells StarBizWeek in an interview.

“The cycle (to renew) is coming, so we do have to replace some equipment but not all. Prices of some equipment also go down over time, which is good for us,” he says, citing the example of computerised tomography (CT) scanners.

TMC, which generates 80% of its revenue from its hospital at Kota Damansara, plans to completely convert the hospital administration floor at Level 7 into wards housing some 60 beds.

This renovation is expected to be the biggest capex component for FY15, the company says.

“We have balance proceeds from the rights issuance of about RM3.69mil and the renovation of Level 7 will cost about RM8mil,” its chief financial officer Yap Eng Gee says.

“Now we have two floors of beds with about 120 beds. And the floor size at Level 7 is about the same as each of these two floors,” Wong says. In total, TMC has 139 beds today.

Most of the balance revenue comes from TMC’s fertility clinics which it ventured into 20 years ago and today have five centres located in the Klang Valley, Penang and Johor.

Wong says it is easier to grow its fertility business as it does not need such a huge capex commitment than a hospital. “It is not too expensive to replicate, and there is more emphasis on medical tourism for overseas patients. This is good for medical tourism as the patient can travel and this is one of the most important point,” he says.

TMC is also focusing on organic growth at the moment does not have any plans for the acquisition of another hospital.

“Not all the land here is being used up yet and there is much (untapped) potential here. We have no firm plans for other hospital sites but we also do not exclude any possibility either,” Wong adds.

On a related matter, Wong also says that he had no knowledge of the possibility of its major 32.6% shareholder Singapore billionaire Peter Lim of injecting his planned 200-bed hospital at Iskandar Malaysia’s medical hub into TMC.

However, any possible acquisition by TMC would need to also consider the startup costs and breakeven times at the due diligence stage although recouping them would be quite easy, several analysts surveyed said.

Meanwhile, TMC is fairly confident that it would grow its bottomline to match the market’s expectation after starting off from a low base just two years ago. “We feel we are maturing, but there is still growth left. Many people forget that we were in the red just three years ago. Even after our rights issuance in 2011, we were still losing money in FY12. Only in FY13 we made a modest operating profit of about RM2.1mil,” Wong says.

“In the industry, hospitals that are in the black generally do not go back into the red. We can make more money, or less money but we generally do not go back into the red,” he adds.

TMC reported a profit from continuing operations of RM6.45mil for its financial year 2014 ended May 31 (FY14), a steep rise from RM2mil previously. Despite the rise in financial performance, TMC’s Wong has however also noted that it had to deal with rising costs as well.

“Whether healthcare is goods and services tax exempt or not, most of these costs would have to be passed on to the consumer. Other costs that have gone up include manpower costs. Recently, the Government raised the salaries of nurses in the public sector and for us we cannot be paying less than the Government,” Wong says.

“But I am still optimistic that the sector would do well this year on the general growing affluence among people in the Klang Valley and that we are located in the right part of town for the middle-class folks,” he adds.

TMC expects its bottomline earnings to be sustained moving forward but notes that growth would not be as momentous as before.

/theSTAR 02-08-2014

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