Asian Healthcare Specialists Limited Upcoming Earnings Announcement

With Asian Healthcare Specialists limited releasing its upcoming FY2020 result in the month of November, we will be reviewing the Group’s recent 1H FY2020 year result announcement highlights and some of their recent updates.

About Asian Healthcare Specialists Limited

Asian Healthcare Specialists Limited (“AHS”) provides a wide spectrum of general and subspecialised orthopaedic, trauma and sports services such as knee/hip replacements, sports medicine/surgery, spine surgery, foot/ankle surgery and minimally invasive orthopaedic procedures.

AHS also have an anaesthesia arm and a physiotherapy practice. AHS currently have 6 senior and experienced orthopaedic medical specialists operating at 4 clinics under “The Orthopaedic Centre” brand at convenient and accessible locations across Singapore.

Each of its medical specialists is subspecialists in specific areas of orthopaedic, trauma and sports medicine, ranging from specialities in the spine (neck and back), shoulder, elbow, hip, knee and foot and ankle.

Recent 1H FY2020 Result Highlights

For 1H FY2020, AHS’s revenue has increased by 12.5% year-on-year to S$6.68 million. The increase in revenue is largely due to the acquisition of Cornerstone Asia Health Pte. Ltd. (“CAH”) on 19 February 2020, contributing S$1.19 million to the Group’s revenue in 1H FY2020.

AHS's other income also surged by more than 100% to S$348,000 due to the increase in interest income earned and government grants or incentives.

On the other hand, Staff costs increased by 38.1% year-on-year to S$3.19 million in 1H FY2020. The increase was mainly due to the increase in the number of staff hired from the new acquisition of CAH.

With that, AHS’s profit after tax suffered an 8.1% drop year-on-year to S$1.26 million.

Partnership with Heliconia

On 22nd July 2020, AHS has announced a partnership with Temasek Holdings’ Heliconia unit to pursue healthcare investments in South-east Asia region. Both AHS and Heliconia has formed a co-investment company called, Fansipan 2 to serve the purpose of healthcare investments.

Heliconia will be taking a majority stake of 76.2% in Fansipan 2, through its Encyclia 1 Investments unit for S$25.6 million while AHS will subscribe the remaining 23.8% stake in Fansipan 2 for S$8 million through its subsidiary, Salvia Ventures.

AHS will fund the S$8 million investment in Fansipan 2 through a combination of proceeds from:

• Convertible bonds it intends to issue to Heliconia

• Remainder of the net proceeds raised from its initial public offering

• Internal resources

The convertible bonds issued to Heliconia will be converted into shares in AHS if Fansipan 2 undertakes a healthcare or healthcare-related investment of more than S$10 million, at S$0.1602 per conversion share.

The cumulative sum of S$33.6 million will be the first tranche of funding for any healthcare or healthcare-related investments as identified by Heliconia, after consulting with AHS.

First Acquisition by Fansipan 2

On 27th August 2020, AHS has made an announcement with regards to the acquisition of a medical group comprising two private hospitals located in Central Vietnam by Fansipan 2.

The funding came from the First Funding Tranche of the Fansipan 2 Investment. AHS believe that there are opportunities for private healthcare players in Vietnam given the expected growth in private healthcare expenditure in Vietnam in the years ahead.

As this Healthcare Investment in Vietnam constitutes a Mandatory Conversion Event, pursuant to the Investment Agreements, each of the Encyclia Convertible Bond and the Vanda Convertible Bond will be mandatorily converted into shares of AHS at a conversion price of S$0.1602 per Conversion Share.

The mandatory conversion was done on 3 September 2020, as indicated above from ShareInvestor WebPro.

Upon the conversion, Heliconia has received close to 25 million shares of ASH, hence giving them a 5.47% stake, which makes Heliconia a substantial shareholder in ASH.

Comparison with AHS’s Peers

As shown above, both AHS and TalkMed are in a net cash position while HC Surgical has a net debt to equity ratio of 0.05 times. This indicates that both AHS and TalkMed are in a better financial position with more than enough cash on hand to meet its debt obligations when compared against HC Surgical.

In terms of liquidity ratio, AHS’s current ratio stands at 3.52 times, which is much higher than HC Surgical’s ratio of 2.04 times, but lower than TalkMed’s ratio of 4.68 times. Despite the differences in current ratio, all 3 companies have more than enough current assets on hand to meet its current liabilities.

Management Outlook

The management has highlighted that as the situation remains fluid with a lack of certainty until the pandemic will be over.

Therefore, the management is unable to ascertain the full financial impact of the pandemic on the financial performance of the Group for FY2020. The Group will continue to monitor the situation and keep shareholders informed of any material developments as and when they arise.

In the long run, AHS's management firmly believes that with an increasing demand for healthcare services, the Group can continue to grow by diversifying and investing in synergistic businesses both locally and internationally in relation to healthcare.