Providing a Personal Touch of Growth - An Interview with Singapore O&G’s top management

Business Activities of Singapore O&G Limited

Established in 2011, Singapore O&G Limited is a leading healthcare service provider dedicated to delivering premier quality medical services to women’s & children’s health and wellness.

With an established track record in the Obstetrics and Gynaecology (“O&G”) segment in Singapore, which provides pre-pregnancy counselling, delivery, pregnancy and post-delivery care, the Group has expanded its spectrum of services to include gynaecological and breast cancer, skin and aesthetic treatments, and paediatrics.

The Group’s clinics, under its four operating segments of O&G, Cancer-related, Dermatology and Paediatrics, are strategically located throughout Singapore to provide easy access to its patients.

Following its recent FY2020 results, Investor-One held an exclusive live interview session for the members of ShareInvestor with Singapore O&G’s Chief Executive Officer, Mr. Eric Choo, to understand more about the business and what is in store for retail investors.

Here are snippets of the live interview (edited for more context):

1) What are their respective contribution shares to the business?

Mr. Choo: The revenue contribution breakdown is as follow:

2) Which is seeing the strongest growth?

Mr. Choo: With an ageing society and rising cancer cases in Singapore, the strongest growth would be the O&G and cancer-related segment. Many might wonder why the O&G segment will have the strongest growth, as the myth suggests that the segment is not going to sustain as a result of the ongoing low birth rate.

However, I would like to debulk the misconception that our O&G segment is only all about childbirth. Our O&G specialists cater to the entire health of the female reproductive system and that is the whole lifecycle ranging from fertility planning and pregnancy to diseases of reproductive organs including gynaecological surgeries.

For our cancer-related segment, we have managed to increase our headcount this year. In April 2021, we have our new colorectal Surgeon, Dr. Sim Hsien Lin, onboard and she has started our new colorectal, endoscopy and general surgery clinic at Mount Elizabeth Novena Specialist Centre. And In fact, we are slated to open our new breast thyroid and general surgery clinic in June, and we hope to continually deepen our cancer specialist talent pool and expand on our list of medical services offering to our patients.

3) Which is facing the greatest challenge?

Mr. Choo: Due to the competition in neighbouring countries such as Malaysia and Thailand and the COVID-19 travel restriction, Singapore medical tourism has really been affected.

While medical tourism is important to the Group, we are fortunate that our patients are mainly local Singaporeans and foreigners residing in Singapore. In general, we only have a small percentage of our patients who are a medical tourist for our O&G and Paediatrics segment.

Approximately 30% of our patients are medical tourists coming into Singapore to see our Cancer related and Dermatology clinics before the COVID-19 pandemic.

Therefore, I would like to think that the business segment that faces the biggest challenge is the Dermatology segment. That said, our Dermatology segment is still profitable despite the challenging climate. This is highly remarkable as both our doctors, Dr. Joyce Lim and Dr. Liew Hui Min, has a strong footing in the Dermatology and Aesthetics market here in Singapore.

4) You had a strong set of results in FY2020 and paid out generous dividends. Give us some colour on how you managed to turn around from losses of some S$1.13 million in FY2019 to S$9.5 million profit in FY2020 - a remarkable S$10.6 million turnaround.

Mr. Choo: In FY2019, the Group impaired SS$11.8 million worth of Goodwill, out of the total Goodwill amount of S$23.2 million, which arises from the acquisition of Dr. Joyce Lim Medical Practice in 2016.

However, in FY2020, with the Dermatology segment being able to generate enough amount of cash, which exceeded the carrying amount of the cash-generating units (“CGUs”), this resulted in no impairment of Goodwill. That has led to a substantial turnaround in the Group's bottom line.

5) You have also been quite generous in your dividend payout, with a ratio of 85 per cent. Is this something you will stick to in future?

Mr. Choo: Apart from the losses in FY2019, the Group has maintained a dividend payout ratio of 85% since our IPO in 2015. Therefore, we strive to continue with this level of dividend payout ratio to reward our shareholder for their continued support and faith in the Group.

6) Let's talk about various elements of your business - O&G Segment. This has been the mainstay of your business. Given the birth-rates in Singapore are flat or declining (it is now about 39,000 births per year), how do you plan to keep the contribution from this business growing, especially as you recruit more doctors?

Mr. Choo: As I mentioned earlier, the O&G segment not only caters to just delivering of babies, but also caters to the entire health of the female reproductive system and that is the whole lifecycle ranging from fertility planning and pregnancy to diseases of reproductive organs including gynecological surgeries.

Meanwhile, the Group has delivered 2,053 babies for FY2020. In fact, this figure has been on a steady trend and registered a year-on-year increase since our IPO in 2015. The figure for FY2020 represents about 10.2% of the total live births in the private sector for Singapore.

Therefore, we still have room to grow by developing our junior O&G specialists because our percentage of live birth in the private sector is still relatively low in comparison with the public sector too.

As we are in the human capital business, we also look into succession planning as part of the business sustainability. We are fortunate to have 2 renowned O&G founding specialists and other senior doctors who can help mentor, grow and motivate our junior doctors. This is a culture that set us apart and is our key distinct feature.

In addition, we are always on the lookout for like-minded and team player medical practitioners to join us so we emphasise a lot on teamwork. Therefore, this is one key important factor for our business model and the way we look at business sustainability.

7) Dermatology Segment - you bought the dermatology business for some S$26 million several years ago. This is a very competitive segment. How is this business doing?

Mr. Choo: There is no doubt about the intense competition faced by the Dermatology segment. However, on that note, we are still able to churn out profits for this segment while many Dermatology clinics out there are struggling to make a profit recently. Hence, I would like to think that we are done well for this segment especially during this challenging period.

In terms of potential acquisitions in the Dermatology segment, this is also something that the Group can explore going forward. However, we must think about how the Group is able to scale up the acquired business. Unless we can find something that is worth acquiring, I do not think that it will be favourable in terms of the Group’s perspective.

8) Cancer-related segment - how is this business doing and what are your plans to grow this segment?

Mr. Choo: I think it is important to grow our Cancer-related segment particularly with the increased demand due to an ageing population and cancer cases on the rise.

Currently, our Cancer-related segment is the second largest contributor to the Group’s bottom line. I would like to deepen our talent pool for cancer specialists and expand our list of medical services to our patients.

We are already growing our Cancer-related segment by having a new colorectal surgeon on board and slated to open a new breast thyroid and general surgery clinic in June.

9) Fertility treatment - what are you doing to grow this business? How do you see the future?

Mr. Choo: Currently, we do not have an in-house fertility IVF (“In Vitro Fertilisation”) specialist. For our patients who are seeking this treatment, we will refer them to a structured hospital or other private specialist based on their financial budget.

Typically, we will encourage our patients to seek fertility treatment in structured hospital as they are able to get the benefit of financial assistance and support to defray some of the out-of-pocket costs. Eligible couples can get up to 75% in co-funding from the government for Assisted Reproduction Technology (“ART”) treatment cycle. This consists of a maximum of 3 fresh and 3 frozen ART treatment cycles.

In addition, we have a partnership with Monash IVF Group, to provide ART services to our patients. They have 2 centers in Malaysia, one in Kuala Lumpur and one in Johor. This provides another alternative for our patients if the local means IVF is exhausted.

So, with the increasing incidence of infertility owing to lifestyle changes, there is demand for fertility treatments and will grow in the future.

10) Future growth for Singapore O&G -

What are your plans in terms of overseas growth? Any acquisitions? If so, where do you see the potential markets?

Mr. Choo: Despite the ongoing border closure, we have recently made an investment in Malaysia. To share more about this investment, we have announced in March that the Group has entered into a joint venture agreement with LYC Healthcare Berhad, to set up a Postpartum Confinement Centre in Johor, offering confinement care and related services. This joint venture is 51:49 owned by LYC Healthcare and Singapore O&G respectively.

The facilities will be located near the Singapore-Malaysia Border to provide postpartum confinement care and related services, catering to both Malaysian and Singaporean customers, who wish to have their confinement period in Johor.

With the current border restriction, this may have to take a step back for now. In fact, the confinement center is currently under renovation and is expected to commence operations in 4Q 2021, with an initial capacity of 60 beds and eventually ramping up to 130 beds.

In terms of the potential overseas markets, we do not restrict ourselves to any particular countries. It boils down more on the opportunities available and the people we worked together to realize the potential of the investment.

11) What is your strategy to identify these opportunities and markets?

Mr. Choo: I think it is all about networking. However, you must evaluate the business and the people that you are going to work with such as the legal, financial due diligence, market research and analysis. In particular, the numbers must make sense before you invest any resources in it. This is my personal opinion and viewpoint on how we should identify opportunities in the market.

12) What are your star performers? Can you identify your main engines of growth, say in 3 years?

Mr. Choo: In terms of business segment, our star performers are definitely O&G and cancer-related segments as they are our top 2 contributors to the Group’s earnings. Furthermore, the O&G and Cancer specialists perform surgical procedures on a regular basis - which are higher in value and margins.

On the other hand, our Paediatrics and Dermatology segments provide mainly outpatient clinical services and some inpatient treatment and procedures. Nevertheless, having said that, we still plan to continue strengthen our non-O&G segment (Cancer related, Paediatrics & Dermatology) in the next 3 years.

13) Given the competitive environment, what strategic advantage does Singapore O&G have? Also, update more colours on the future expansion plans going forward.

Mr. Choo: I think in terms of our strategic advantages, we are fortunate to have several established and respected senior doctors with us. They are our founders, Dr. Lee Keen Whye and Dr. Heng Tung Lan, both of them are very renowned O&G specialists. Also, our Chairman, Dr. Beh Suan Tiong, is an O&G specialist as well. Last but not least, Dr. Joyce Lim, who is the Head of Dermatology.

These senior doctors mentioned above helps to mentor, groom and motivate the junior doctors. Due to their reputation and seniority in the marketplace, it makes my job as a CEO for doctor recruitment much easier. So, I would say that this is one of the strategic advantages that we have ahead of other medical groups in the market and this really set us apart from the rest.

In terms of our future plans, we have 5 key areas that we are looking at in the next few years:

• Strengthen Singapore O&G’s brand awareness and increase market share.

• Recruit more specialists and medical practitioners to strengthen all business segment.

• Continue to grow our non-O&G segment to increase their revenue & profit contribution.

• Increase inter-clinic referral through synergy awareness.

• Identify opportunities in business partnership & collaborations.

14) Lastly, how has the pandemic and the curbs associated with it impacted your business?

Mr. Choo: The COVID-19 pandemic has impacted the Group and the industry to a certain extent. Due to the regional and global travel restrictions, it has an impact on the Singapore tourism and healthcare industry. In addition, all businesses need to follow and adhere to the guidelines as prescribed by the Ministry of Health (“MOH”) and the Ministry of Trade & Industry (“MTI”).

For example, the implementation of Safe Entry and social distancing resulted in the respective clinic having to space out patient’s appointments to avoid over-crowding during the peak clinical hours. On top of that, we must follow the MOH guidelines of only providing essential services to our patients during last year’s circuit breaker period.

With these measures, it restricts the number of patients we can see on a daily and monthly basis.

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