At TripleOne Somerset, about 50 NextInsight readers visited the various specialist clinics of Healthway Medical. In the picture above, they are learning about hair transplants (mainly for aesthetic purpose). Healthway Medical is one of only a few companies in Singapore licensed to do such transplants.


Visiting NeuGlow to learn more about aesthetics medicine.


L-R: P. Sudhan, Ken Tan, Royston Yang and Lam Pin Woon (President of Healthway Medical).

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.

L-R: Ken Tan, Kelvin Chen (marketing manager, Healthway), Phau Soek Yee (GM, Corporate Finance, Healthway)

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:

Angeleca Lim (left), Financial Controller of Healthway, with investors.

> 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.

Lam Pin Woon: Growth drivers for Healthway Medical will be the mobile service and management contracts from HMD.

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)

After touring the clinics on three floors of TripleOne Somerset, it's time for a presentation by Lam Pin Woon, President of Healthway Medical, and a Q&A session.

> 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.

After Mr Lam's presentation and a Q&A session: A sumptuous lunch!

> 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.

> Miscellanous:

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'

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#7 Gina 2012-08-18 20:05
Votes with HMI, Hyflux and Olam, thanks again.
#6 Lee Lee 2012-08-16 03:56
Appreciate so much your effort in making it possible for us to learn more abt Healthway from Mr Lam himself. The visit provided much insight into the company`s operations which enable us to understand the biz model of HeAlthway better. How about visit to QAF, Kingsmen,-- these are companies which are of good fundamentals and it will offer great enhancement of of our understanding of their operations if we have the opportunities to meet the Co`s management personally.

There is also HMI to consider a visit as that will give us a good comparison of the companies in the Medical sector..

Really look forward to the company visit and, once again, thank You for the most informative and interesting visit to Healthway. Cheeeeers!
#5 Seak TS 2012-08-15 06:48
Thanks to the Nextinsight team for arranging this viist. It is indeed very informative and provide a good insight on the company directions and potential for the future. I believe this is a good long term counter to hold to realise good returns.
#4 Chungchiang 2012-08-14 16:01
Thank you for arranging a chance to meet its management oat a convenient location and at a convenient time. I had not been able to attend its many AGMs and AGMs held on weekdays at NUS Alumni House.
#3 gina 2012-08-14 07:06
indeed useful - healthway is my biggest stock holding in my portfolio but the one with the biggest paper losses for quite a while now. glad the current management seems like a honest and diligent team who understands their job well. hope to see returns in the near future.
#2 Sudhan 2012-08-14 04:54
Thanks once again for organising the session. I learnt a lot about Healthway's
business. Hope to attend more of such events.
#1 Ken Tan 2012-08-14 04:50
Thanks for the arrangement on Healthway. Am always reading Next Insight. Keep in touch!

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