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Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income





Alliance Healthcare Group, an integrated healthcare group, listed on SGX Catalist today. The Group leverages the use of technology to provide a broad suite of healthcare services primarily in Singapore. 
	 
	
Innovations in digital healthcare, coupled with growth in healthcare insurance sector bode well for the healthcare industry in Singapore. Some growth drivers include healthcare-related technology disruptions, growing corporate healthcare insurance coverage, as well as consolidation of general practitioner (GP) clinics in a highly fragmented market. 
	 
	
SGX lists eighteen healthcare service provider stocks with a combined market capitalisation of S$22 billion. The eighteen stocks average a price-to-earnings ratio of 28.1x.


 

Overview and Drivers of Healthcare Industry

Innovations in digital healthcare and growth in healthcare insurance sector have allowed healthcare providers to leverage on technology to provide better services and access to higher potential patient volume. In page 41 of its offer document, Alliance Healthcare Group identified the following industry trends and drivers:



Technology disruptions – According to Converging Knowledge, there have been many new innovations introduced in the healthcare sector. Increasingly, healthcare providers are also tapping into technology to provide better and more efficient services to customers. The Singapore government’s push towards digital transformation of the healthcare industry will likely expand the Group’s network of potential pool of medical services provider as an increasing number of practitioners move towards digitization of operations. 
	 
	
Growth in corporate healthcare insurance premiums in Singapore – According to the Life Insurance Association Singapore, the amount of group accident and health premiums in force increased from S$682.7 million in 2016, to S$788.0 million in 2017 (+15.4% YoY). According to Converging Knowledge, a higher amount of group accident and health premiums in force may suggest increased coverage for employees, or more companies signing up for corporate healthcare insurance coverage. With insurance companies increasingly outsourcing policy administration and claims processing, growth in the healthcare insurance sector will translate into higher potential patient volume for managed healthcare solutions business. 
	 
	
Consolidation of GP clinics in Singapore – According to Converging Knowledge, industry players expect a growing number of Singapore GP clinics to consolidate in the next three years. The mature yet highly fragmented GP services market in Singapore presents opportunities for the Group to seek inorganic growth in this sector through acquisitions.

Alliance Healthcare Group’s Catalist IPO

Alliance Healthcare Group is an integrated healthcare group that designs and provides enterprise-level healthcare solutions to meet the demands of organisations as well as individual patients for reliable and cost-effective healthcare services.

Post listing, major shareholder Alpine Investment Holdings will hold 64.2% in Alliance Healthcare Group.

Some key extracts from its offer document include:

Business Strategies and Future Plans


Expand network of self-owned GP clinics, specialist care services and medical facilities in Singapore
	Pursue growth through acquisitions, joint ventures and/or strategic alliances
	Invest in technology systems as part of the digital transformation in the delivery of healthcare services
	Expand pharmaceutical services business

Competitive Strengths


Successfully established in delivering managed healthcare solutions
	Knowledge and competencies to assist corporations and insurance companies in managing escalating healthcare cost due to a quickly-ageing population
	Integrated approach towards delivering healthcare services
	Continuous innovation in delivering healthcare solutions
	Experienced management team led by Executive Chairman and CEO who is a medical professional

Key Risks (Page 54 of the Offer Document shows complete list of risk factors)


Many of the Group’s business operations subject to extensive government laws, regulations, licensing and accreditation which are evolving
	Business dependent on demand for managed healthcare solutions from corporations and insurers
	Ability to attract and retain skilled and qualified medical professionals and support staff
	Dependent on number of key relationships with insurance companies for patient volume
	Dependent on relationships with panel of medical services providers, corporations and insurance companies (whom have contractual relationships with the Group)

Financials From Offer Document


According to the offer document, the Group’s audited FY2018 total revenue was at S$33.8 million, increasing 14.9% YoY due to increase in revenue from all business segments.
	FY2018 net profit after tax was S$3.5 million, almost double that of FY2017.
	Net profit margin of the Group increased from 5.9% in FY2017 to 10.3% in FY2018.
	Alliance Healthcare Group currently does not have a fixed dividend policy. However, the Board intends to recommend and distribute dividends of at least 30% of the Group’s net profits after tax (excl. exceptional items) for FY2020 and FY2021 to reward shareholders for participating in the Group’s growth.




			Profit (loss) before tax by business segment (%²)
			
			
			FY2016
			
			
			FY2017
			
			
			FY2018
			
		


			Managed healthcare solutions
			
			
			(60.4)
			
			
			9.3
			
			
			39.5
			
		


			GP clinics services
			
			
			174.6
			
			
			64.5
			
			
			31.4
			
		


			Specialist care services
			
			
			14.8
			
			
			18.7
			
			
			14.4
			
		


			Pharmaceutical services
			
			
			27
			
			
			26.2
			
			
			21.2
			
		


			Others¹
			
			
			(56)
			
			
			(18.7)
			
			
			(6.5)
			
		


			Total
			
			
			100
			
			
			100
			
			
			100
			
		

Note: 
(1) “Others” refers to investment holding and provision of administrative and management services. 
(2) “%” is computed based on the business segmental profit (loss) before tax divided by the audited consolidated profit before tax of the Group.

      
    
    Alliance Healthcare Financials
Valuation


According to the offer document, the Group’s FY2018 historical EPS was at 1.66 cents (S$) (based on Company’s share capital immediately before completion of invitation shares of 175.9 million shares and assuming that the service agreements had been in place from the beginning of FY2018).
	Based on the invitation price of S$0.20 per share, this implies a P/E ratio of 12.1x.
	A premium over NAV of 258.1% (after adjusting for the estimated net proceeds from invitation shares issuance and company’s share capital immediately after the completion of the invitation).

SGX’s Healthcare Stocks 

SGX lists 18 healthcare service provider stocks with a combined market capitalisation of S$22 billion. The 18 stocks have an average price-to-earnings ratio of 28.1x and generated an average year-to-date total return of -2.3%. The table below details the 18 healthcare stocks, sorted by market capitalisation. Click on the stock name to view its profile in StockFacts.

 




			Name 
			
			
			SGX Code
			
			
			Market Cap S$M
			
			
			Price S$
			
			
			Total Return YTD %
			
			
			1 Year Total Return %
			
			
			3 Year Total Return %
			
			
			P/E (x)
			
			
			P/B (x)
			
			
			ROE (%)
			
			
			Div Yield %
			
		



			IHH Healthcare
			
			
			Q0F
			
			
			15,702
			
			
			1.79
			
			
			0.0
			
			
			-10.0
			
			
			-6.9
			
			
			NM¹
			
			
			2.0
			
			
			2.7
			
			
			0.6
			
		


			Raffles Medical Group
			
			
			BSL
			
			
			1,834
			
			
			1.02
			
			
			-5.5
			
			
			-1.4
			
			
			-11.1
			
			
			26.6
			
			
			2.2
			
			
			8.8
			
			
			2.5
			
		


			Thomson Medical Group
			
			
			A50
			
			
			1,454
			
			
			0.055
			
			
			-24.4
			
			
			-31.7
			
			
			-25.1
			
			
			73.5
			
			
			2.5
			
			
			0.2
			
			
			0.5
			
		


			Talkmed Group
			
			
			5G3
			
			
			697
			
			
			0.53
			
			
			-9.8
			
			
			-17.7
			
			
			7.0
			
			
			22.8
			
			
			8.6
			
			
			38.4
			
			
			3.4
			
		


			Health Management International
			
			
			588
			
			
			486
			
			
			0.58
			
			
			8.0
			
			
			-7.6
			
			
			22.5
			
			
			29.2
			
			
			N/A
			
			
			N/A
			
			
			1.1
			
		


			Q&amp;M Dental Group
			
			
			QC7
			
			
			389
			
			
			0.495
			
			
			-0.1
			
			
			-5.0
			
			
			-11.2
			
			
			29.2
			
			
			3.3
			
			
			11.5
			
			
			1.7
			
		


			OUE Lippo Healthcare
			
			
			5WA
			
			
			289
			
			
			0.065
			
			
			0.0
			
			
			-39.1
			
			
			2.5
			
			
			N/A
			
			
			1.2
			
			
			-3.5
			
			
			N/A
			
		


			Singapore Medical Group
			
			
			5OT
			
			
			183
			
			
			0.385
			
			
			-3.8
			
			
			-20.6
			
			
			37.2
			
			
			14.0
			
			
			1.4
			
			
			10.8
			
			
			N/A
			
		


			Singapore O&amp;G
			
			
			1D8
			
			
			172
			
			
			0.36
			
			
			5.4
			
			
			4.8
			
			
			1.2
			
			
			18.7
			
			
			3.8
			
			
			20.8
			
			
			4.7
			
		


			ISEC Healthcare
			
			
			40T
			
			
			160
			
			
			0.31
			
			
			28.6
			
			
			12.2
			
			
			10.2
			
			
			18.8
			
			
			2.3
			
			
			12.4
			
			
			8.2
			
		


			Healthway Medical Corp
			
			
			5NG
			
			
			127
			
			
			0.028
			
			
			-12.5
			
			
			-41.7
			
			
			-4.3
			
			
			N/A
			
			
			0.7
			
			
			-3.8
			
			
			N/A
			
		


			Cordlife Group
			
			
			P8A
			
			
			117
			
			
			0.46
			
			
			22.2
			
			
			-42.1
			
			
			-29.8
			
			
			28.2
			
			
			N/A
			
			
			N/A
			
			
			0.9
			
		


			HC Surgical Specialists
			
			
			1B1
			
			
			83
			
			
			0.555
			
			
			-6.8
			
			
			-16.4
			
			
			N/A
			
			
			18.6
			
			
			4.9
			
			
			29.2
			
			
			3.6
			
		


			Clearbridge Health
			
			
			1H3
			
			
			76
			
			
			0.156
			
			
			-6.6
			
			
			-63.7
			
			
			N/A
			
			
			N/A
			
			
			1.6
			
			
			-34.0
			
			
			N/A
			
		


			Asian Healthcare Specialists
			
			
			1J3
			
			
			75
			
			
			0.23
			
			
			5.4
			
			
			-16.2
			
			
			N/A
			
			
			24.7
			
			
			4.2
			
			
			32.6
			
			
			4.3
			
		


			Aoxin Q &amp; M Dental Group
			
			
			1D4
			
			
			72
			
			
			0.19
			
			
			-15.6
			
			
			-11.8
			
			
			N/A
			
			
			N/A
			
			
			1.5
			
			
			-0.2
			
			
			2.2
			
		


			Medinex
			
			
			OTX
			
			
			35
			
			
			0.27
			
			
			3.1
			
			
			N/A
			
			
			N/A
			
			
			33.3
			
			
			2.6
			
			
			8.3
			
			
			3.1
			
		


			AsiaMedic
			
			
			505
			
			
			5
			
			
			0.012
			
			
			-29.4
			
			
			-68.4
			
			
			-43.0
			
			
			N/A
			
			
			1.1
			
			
			-70.7
			
			
			N/A
			
		


			Average
			
			 
			 
			 
			
			-2.3
			
			
			-22.1
			
			
			-3.9
			
			
			28.1
			
			
			2.8
			
			
			4.0
			
			
			2.8
			
		


			Market Cap-Weighted Average
			
			 
			 
			 
			
			-2.0
			
			
			-11.6
			
			
			-6.8
			
			
			37.8
			
			
			2.3
			
			
			4.6
			
			 
		

Note: (1) Not Meaningful 
Source: Bloomberg &amp; SGX StockFacts (Data as of 30 May 2019)

Additional Information from Offer Document

Company Background  
Alliance Healthcare Group is an integrated healthcare group that leverages the use of technology to provide a broad suite of healthcare services primarily in Singapore. As part of the service offerings, the Group design and 
provide enterprise-level healthcare solutions to meet the demands of organisations as well as individual patients for reliable and cost-effective healthcare services. Majority of the Group’s revenue are derived from Singapore, which accounts for 89.5% of FY2018 total revenue. In the same year, Hong Kong market contributed to 3.2% of the Group’s revenue.

Business Segment



GP clinic services (46.1% of FY2018 total revenue) – Provides services that include general medical consultations, management of acute and chronic conditions, health screening for work permit applications as well as pre-employment health screening, children’s health services, geriatric care and minor surgical procedures.
	
Pharmaceutical services (25.2% of FY2018 total revenue) – Engages in the wholesale distribution of pharmaceutical products to hospitals, pharmacies and clinics in Singapore and other overseas markets.
	
Managed healthcare solutions (14.5% of FY2018 total revenue) – Provides solution for outpatient healthcare and treatments at private hospitals.
	
Specialist care services (14.2% of FY2018 total revenue) – Delivers medical diagnosis and medical or surgical treatments of ENT, colorectal and orthopaedic conditions.

IPO Details


Offer price at S$0.20
	32 million Invitation Shares consisting of 1.0 million Invitation shares (public offer) and 31.0 million Placement Shares
	Estimated IPO market capitalisation at S$41.6 million
	Use of IPO gross proceeds (S$6.4 million)
	
S$3.0 million – Expand the Group’s business through (i) expansion of self-owned GP clinics network, specialist care services and medical facilities in Singapore as well as (ii) acquisitions, joint ventures and/or strategic alliances.
		S$1.9  million – Underwriting and placement commissions as well as listing expenses
		S$0.8  million – Working capital requirements
		S$0.5 million – Invest in technology systems as part of the digital transformation of the delivery of healthcare services
		S$0.2 million – Expand pharmaceutical services business
	


Did You Know?

Singapore leads Southeast Asia in digital healthcare practices even as the adoption of digital healthcare remains low in the region. One of the contributing factors is the government’s promotion of IT adoption and innovation in the healthcare sector. The Integrated Clinic Management Systems programme was launched a decade ago to improve the operations of General Practitioner (GP) clinics and better plan for patient treatments in coordination with hospitals and other healthcare providers. In 2017, the country announced it would pump in more than S$19 billion over five years for research and development, some of which will go towards innovation at the intersection of healthcare and IT.



Alliance Healthcare, Leveraging on Digital Health Trends, Debuts on SGX