ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

Thailand plans to fully reopen to foreign visitors in 120 days, given it aims to give at least one dose of vaccine to the majority of residents by early October.
The country aims for some tourist destinations to be open to fully vaccinated visitors without any quarantine requirement before this time. Phuket is seen as the “pilot” for the new scheme.
Thailand's economy is highly dependent on tourism with around 12% of GDP officially from tourism but the true exposure is closer to 20% given all the related industries outside travel and hotels from retail to banks. 
These most recent plans were unveiled in an address by Prime Minister Prayuth Chan-Ocha in a National address yesterday, which included a number of important concessions, which can be seen in the detailed section.
We recommend increasing weightings in Thai hotels, hospitals, selective retailers, and banks to play this tourism recovery theme. Please see below for details.

Thailand plans to fully reopen to foreign visitors in 120 days, given it aims to give at least one dose of vaccine to the majority of residents by early October.
The country aims for some tourist destinations to be open to fully vaccinated visitors without any quarantine requirement before this time. Phuket is seen as the “pilot” for the new scheme.
Thailand's economy is highly dependent on tourism with around 12% of GDP officially from tourism but the true exposure is closer to 20% given all the related industries outside travel and hotels from retail to banks. 
These most recent plans were unveiled in an address by Prime Minister Prayuth Chan-Ocha in a National address yesterday, which included a number of important concessions, which can be seen in the detailed section.
We recommend increasing weightings in Thai hotels, hospitals, selective retailers, and banks to play this tourism recovery theme. Please see below for details. 

Thailand - 120 Days Later - Fully Vaccinated Tourism to Resume

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

On 6 May 2021, Bloomberg reported that <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a>, the largest shareholder with a 32.90% stake, is currently exploring a proposal to privatise <a href="https://www.smartkarma.com/entities/ihh-healthcare-bhd" target="_blank" data-smartkarma-citation="entities:876:1" rel="noopener">IHH Healthcare (IHH MK)</a>. Mitsui is aiming to partner with private equity firms and has reached out to Khazanah Nasional Berhad, the second-largest shareholder with a 26.02% stake, to acquire its stake, according to Bloomberg. Mitsui and IHH have not formally commented on the report. On the back of the report, the shares have risen 8.8% from the unaffected price of RM5.20 (5 May) to the last close price of RM5.66. IHH is listed on the Main Markets of Bursa Malaysia and the Singapore Stock Exchange. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. Mitsui sits just below the threshold and the acquisition of further shares from Khazanah Nasional Berhad would trigger an MGO. <div class="content-highlight">We think that report has some credibility due to Mitsui’s view that IHH is a core asset to fulfil its ambition of expanding in the largest healthcare ecosystem in Asia. Also, Mitsui has a previous working relationship with Khazanah Nasional Berhad and announced the acquisition of a 16% stake in IHH from Khazanah Nasional Berhad in November 2018. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal). </div>

On 6 May 2021, Bloomberg reported that Mitsui &amp; Co Ltd (8031 JP), the largest shareholder with a 32.90% stake, is currently exploring a proposal to privatise IHH Healthcare (IHH MK). Mitsui is aiming to partner with private equity firms and has reached out to Khazanah Nasional Berhad, the second-largest shareholder with a 26.02% stake, to acquire its stake, according to Bloomberg. Mitsui and IHH have not formally commented on the report. On the back of the report, the shares have risen 8.8% from the unaffected price of RM5.20 (5 May) to the last close price of RM5.66. IHH is listed on the Main Markets of Bursa Malaysia and the Singapore Stock Exchange. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. Mitsui sits just below the threshold and the acquisition of further shares from Khazanah Nasional Berhad would trigger an MGO. We think that report has some credibility due to Mitsui’s view that IHH is a core asset to fulfil its ambition of expanding in the largest healthcare ecosystem in Asia. Also, Mitsui has a previous working relationship with Khazanah Nasional Berhad and announced the acquisition of a 16% stake in IHH from Khazanah Nasional Berhad in November 2018. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal). 

IHH Healthcare’s Possible Privatisation by Mitsui

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

On the <a href="https://www.bursamalaysia.com/market_information/announcements/company_announcement?keyword=&amp;cat=&amp;sub_type=&amp;company=5225&amp;mkt=&amp;alph=&amp;sec=&amp;subsec=&amp;dt_ht=02%2F10%2F2018&amp;dt_lt=29%2F12%2F2018%23%2F&amp;page=2#/?category=all" target="_blank" rel="noopener">29 November</a> 2018, Khazanah Nasional sold a 16%, US$2.01bn stake in <a href="https://www.smartkarma.com/entities/ihh-healthcare-bhd" target="_blank" data-smartkarma-citation="entities:876:1" rel="noopener">IHH Healthcare (IHH MK)</a> to <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a>, elevating Mitsui's long-time mid-teens stake to 32.9% - allowing Mitsui to become IHH's largest shareholder - with Khazanah's holding declining to 26%. Mitsui's stake is a shade below Malaysia's 33% mandatory takeover threshold. 
Reportedly Mitsui is now exploring a deal to take IHH private, and has been sounded out by private equity outfits as to a potential transaction. According to media reports, Khazanah has been approached to sell its stake. 
Shares closed up 7.88% yesterday on the rumours.
More below the fold.

On the 29 November 2018, Khazanah Nasional sold a 16%, US$2.01bn stake in IHH Healthcare (IHH MK) to Mitsui &amp; Co Ltd (8031 JP), elevating Mitsui's long-time mid-teens stake to 32.9% - allowing Mitsui to become IHH's largest shareholder - with Khazanah's holding declining to 26%. Mitsui's stake is a shade below Malaysia's 33% mandatory takeover threshold. 
Reportedly Mitsui is now exploring a deal to take IHH private, and has been sounded out by private equity outfits as to a potential transaction. According to media reports, Khazanah has been approached to sell its stake. 
Shares closed up 7.88% yesterday on the rumours.
More below the fold. 

IHH Healthcare (IHH MK): More Medicine For Mitsui?

Equity Bottom-Up

Mitra Keluarga Karyasehat Tbk / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/mitra-keluarga-karyasehat-tbk" target="_blank" data-smartkarma-citation="entities:288:1" rel="noopener">Mitra Keluarga Karyasehat Tbk (MIKA IJ)</a> announced a robust set of results for 1Q2021 late last week, with revenue growth of +37.6% YoY, mainly driven by COVID-19 cases, which command a higher treatment intensity.
Volume for Non-COVID-19 inpatient days also increased, up +5.6% QoQ compared to 4Q 2020, with occupancy improving to 61% for non-COVID beds. The improvement in non-COVID-19 patients bodes well for this year's outlook. 
Mitra Keluarga continues to add more hospitals, through both greenfield and brownfield expansion plans and has opened one new hospital already this year. It will commence the groundbreaking for its 27th &amp; 28th hospitals in 1H2021. M&amp;A opportunities also remain a potential growth driver with two other hospitals currently in the pipeline. 
Patient numbers declined in 1Q2021 YoY but revenues per outpatient and inpatient days increased significantly due to a significantly higher number of COVID-19 patients being treated. 
<a href="https://www.smartkarma.com/entities/mitra-keluarga-karyasehat-tbk" target="_blank" data-smartkarma-citation="entities:288:1" rel="noopener">Mitra Keluarga Karyasehat Tbk (MIKA IJ)</a> bed Occupancy Ratio reached 63.4% for 1Q2021, compared to 65.7% in 1Q2020, mainly boosts by high COVID-19 bed occupancies, although non-COVID bed occupancies were not far off last year.
<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/mitra-keluarga-karyasehat-tbk" target="_blank" data-smartkarma-citation="entities:288:1" rel="noopener">Mitra Keluarga Karyasehat Tbk (MIKA IJ)</a> trades on 23.9x FY21E EV/EBITDA and 24.2x FY22E EV/EBITDA versus its 5-year average of 29.5x making the company look relatively attractive. It is likely to see a gradual tapering off in terms of revenues from COVID-19 treatments as the vaccination program starts to gain traction but it will still be an important source of revenue in the medium term, together with the fact that it is already seeing a pick-up in its normal elective treatments.
</div>

Mitra Keluarga Karyasehat Tbk (MIKA IJ) announced a robust set of results for 1Q2021 late last week, with revenue growth of +37.6% YoY, mainly driven by COVID-19 cases, which command a higher treatment intensity.
Volume for Non-COVID-19 inpatient days also increased, up +5.6% QoQ compared to 4Q 2020, with occupancy improving to 61% for non-COVID beds. The improvement in non-COVID-19 patients bodes well for this year's outlook. 
Mitra Keluarga continues to add more hospitals, through both greenfield and brownfield expansion plans and has opened one new hospital already this year. It will commence the groundbreaking for its 27th &amp; 28th hospitals in 1H2021. M&amp;A opportunities also remain a potential growth driver with two other hospitals currently in the pipeline. 
Patient numbers declined in 1Q2021 YoY but revenues per outpatient and inpatient days increased significantly due to a significantly higher number of COVID-19 patients being treated. 
Mitra Keluarga Karyasehat Tbk (MIKA IJ) bed Occupancy Ratio reached 63.4% for 1Q2021, compared to 65.7% in 1Q2020, mainly boosts by high COVID-19 bed occupancies, although non-COVID bed occupancies were not far off last year.

Mitra Keluarga Karyasehat Tbk (MIKA IJ) trades on 23.9x FY21E EV/EBITDA and 24.2x FY22E EV/EBITDA versus its 5-year average of 29.5x making the company look relatively attractive. It is likely to see a gradual tapering off in terms of revenues from COVID-19 treatments as the vaccination program starts to gain traction but it will still be an important source of revenue in the medium term, together with the fact that it is already seeing a pick-up in its normal elective treatments.


Mitra Keluarga Karyasehat (MIKA IJ) - Occupancy and Profitability Rising

Siloam International Hospitals / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> released an impressive set of FY2020 numbers last week evening with net operating revenues up by +5.3% but EBITDA up by +37.4% and with EBITDA margins increasing to 21.6% versus 16.6% in 2019. Net profit was up by +365.8% YoY to IDR125bn in FY2020, whilst the company's free cash flow increased by +772% to IDR1,068bn in FY2020 as a whole. 
Average revenue per inpatient days increased by +19.1% YoY, whilst average revenue per outpatient visits increased by +39.9% YoY in FY2020, both of which helped to offset lower inpatient and outpatient numbers. 
The company has put in place a number of new initiatives to grow the business and continue to monetize existing assets more effectively. This should continue to drive future revenues and profitability, coupled with more effective pricing across its hospital network and more effective cost savings as procurement.
<a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> continues to benefit from COViD-19 testing and treatment, which saw a ramp-up during 2020, and has continued into 2021. 
The company also paid a special dividend to recognize its transformation successes on top of a 45% payout ratio bringing the total payout to 181%, with a commitment to payout more than 25% of earnings as a dividend barring unforeseen circumstances.
<a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> trades on an FY21E EV/EBITDA of 9.9x and FY22E EV/EBITDA of 6.6x making it look attractive both from a historical perspective  and versus local hospital peers <a href="https://www.smartkarma.com/entities/mitra-keluarga-karyasehat-tbk" target="_blank" data-smartkarma-citation="entities:288:1" rel="noopener">Mitra Keluarga Karyasehat Tbk (MIKA IJ)</a> and <a href="https://www.smartkarma.com/entities/medikaloka-hermina-tbk-pt" target="_blank" data-smartkarma-citation="entities:27000:1" rel="noopener">Medikaloka Hermina (HEAL IJ)</a>, as well as its regional peer group. We also expect upward revisions to analyst forecasts.

Siloam International Hospital (SILO IJ) released an impressive set of FY2020 numbers last week evening with net operating revenues up by +5.3% but EBITDA up by +37.4% and with EBITDA margins increasing to 21.6% versus 16.6% in 2019. Net profit was up by +365.8% YoY to IDR125bn in FY2020, whilst the company's free cash flow increased by +772% to IDR1,068bn in FY2020 as a whole. 
Average revenue per inpatient days increased by +19.1% YoY, whilst average revenue per outpatient visits increased by +39.9% YoY in FY2020, both of which helped to offset lower inpatient and outpatient numbers. 
The company has put in place a number of new initiatives to grow the business and continue to monetize existing assets more effectively. This should continue to drive future revenues and profitability, coupled with more effective pricing across its hospital network and more effective cost savings as procurement.
Siloam International Hospital (SILO IJ) continues to benefit from COViD-19 testing and treatment, which saw a ramp-up during 2020, and has continued into 2021. 
The company also paid a special dividend to recognize its transformation successes on top of a 45% payout ratio bringing the total payout to 181%, with a commitment to payout more than 25% of earnings as a dividend barring unforeseen circumstances.
Siloam International Hospital (SILO IJ) trades on an FY21E EV/EBITDA of 9.9x and FY22E EV/EBITDA of 6.6x making it look attractive both from a historical perspective  and versus local hospital peers Mitra Keluarga Karyasehat Tbk (MIKA IJ) and Medikaloka Hermina (HEAL IJ), as well as its regional peer group. We also expect upward revisions to analyst forecasts. 

Siloam International Hospital (SILO IJ) - A Quickening Metabolism

Thailand

Bangkok Chain Hospital Public Company Limited operates a chain of hospitals in Thailand serving both the cash and managed care markets.

Chularat Hospital PCL owns medical centers and hospitals. The Company operates a variety of centers specializing in treatments such as hand surgery, open heart surgery, and strokes as well as providing emergency services and patient care. Chularat Hospital serves the medial industry throughout Thailand.

Vibhavadi Medical Center Public Company Limited owns and operates the Vibhavadi Hospital. Located in Bangkok, the Hospital provides full range of medical services.

Thonburi Healthcare Group Public Company Limited offers health care services. The Hospital provides medical treatment, diagnosis, and surgeries, as well as supply of medical equipment, residential care services, and development of software for hospital management. Thonburi Healthcare Group serves customers worldwide.

Praram 9 Hospital PCL operates as a hospital. The Hospital provides medical services that includes, check-ups, diagnoses, skin care, rehabilitation, X-ray, and surgeries, as well as treatment of joint diseases, kidney, high blood pressure, cancer, diabetes, neurology, vertigo, and headache. Praram 9 Hospital serves patients in Thailand.

Thai Nakarin Hospital PCL operates the Thai Nakarin Hospital. The hospital provides 24-hour inpatient and outpatient services.

Mahachai Hospital Public Company Limited owns and operates Mahachai Hospital. Located in Samut Sakorn, a province adjacent to Bangkok, the Hospital has 180 inpatient beds and 17 diagnostic rooms for 880 outpatients daily.

Chiang Mai Ram Medical Business PLC operates hospital's in Thailand.

Srivichai Vejvivat PCL operates a hospital that provides specialty health care services in Thailand.

Rajthanee Hospital Public Company Limited provides general medical and surgical hospital services.

Shanghai Pharmaceuticals Holding Co., Ltd. manufactures, retails, and wholesales a variety of pharmaceuticals including biopharmaceuticals, chemical and Chinese traditional medicines, and healthcare products. The Company also invests in new medicine development and provides related services.

Shanghai Pharmaceuticals Holding (2607 HK)

Fortis Healthcare Ltd. is a health care provider.  The Company operates multi- specialty hospitals, a boutique-style hospital, and various satellite and heart command centers.

LHC Group Inc. provides post-acute healthcare services primarily to Medicare beneficiaries in rural markets in the southern United States. The company provides home-based services through home nursing agencies and hospices and facility-based services through long-term acute care hospitals and  outpatient rehabilitation clinics.

RadNet, Inc. owns and operates outpatient diagnostic imaging centers.  The Company's centers are located throughout California.

HealthEquity, Inc. provides technology-enabled services platforms that allow consumers to make healthcare saving and spending decisions. Consumers can access their tax-advantaged healthcare savings, compare treatment options and pricing, evaluate and pay healthcare bills, receive personalized benefit and clinical information, and earn wellness incentives.

Acadia Healthcare Co Ltd operates a network of behavioral health centers. The Company provides psychiatric and chemical dependency services, inpatient psychiatric hospitals, residential treatment centers, outpatient clinics, and therapeutic school based programs across the United States.

Select Medical Holdings Corporation is an operator of specialty hospitals and outpatient rehabilitation clinics. The Company provides medical rehabilitation services on a contract basis at nursing homes, hospitals, assisted living and senior care centers, schools and work sites.

Option Care Health, Inc. provides infusion and home care management solutions. The Company offers products, services, and condition-specific clinical management programs for gastrointestinal abnormalities, infectious diseases, cancer, organ and blood cell transplants, bleeding disorders, and heart failures. Option Care Health serves patients in the United States.

CorVel Corporation provides managed care services in the workers' compensation, accident and health, and auto insurance markets across the United States.  The Company provides services to employers, government entities, insurance companies, and third party administrators.  CorVel provides a network of preferred providers, as well as case management, bill review, and other services.

Celesio AG wholesales and retails pharmaceuticals to customers in Europe.  The Company wholesales pharmaceuticals, operates retail pharmacies, and provides logistics and transportation services for pharmaceuticals at local, national and European level.

Bumrungrad Hospital Public Company Limited, through its subsidiaries,  owns and operates the Bumrungrad Hospital. Located in Bangkok, the Hospital has capacity of international standard medical care with 554 beds for inpatients and approximately 125 clinic examination suites that can serve up to 3,000 outpatients daily.

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Bumrungrad Hospital Pub Co (BH TB)

Thailand - 120 Days Later - Fully Vaccinated Tourism to Resume

Thailand plans reopen to reopen its borders to the fully vaccinated in 120 days without quarantine restrictions, which will be a boon for the...

Angus Mackintosh

IHH Healthcare’s Possible Privatisation by Mitsui

Mitsui, the largest shareholder, is currently exploring a proposal to privatise IHH. Overall, at the last close price, the downside risk is low...

Arun George

IHH Healthcare (IHH MK): More Medicine For Mitsui?

If Khazanah is onboard with a privatisation, expect the other government-link shareholders to follow suit, which together with Aydınlar's 5.9%...

David Blennerhassett

Mitra Keluarga Karyasehat (MIKA IJ) - Occupancy and Profitability Rising

Mitra Keluarga (MIKA IJ) is probably the best quality listed hospital player in Indonesia, with good governance and throwing off the highest...

Angus Mackintosh

Siloam International Hospital (SILO IJ) - A Quickening Metabolism

Siloam Hospital's recent results demonstrate the management's ability not only to cope with COVID-19 and to benefit from it but also to adjust its...

Angus Mackintosh

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