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Healthway finds upside during the downturn

The firm recently posted a 154% jump in net earnings to almost $4m

By VEN SREENIVASAN


FEARS of a flu pandemic may be causing jitters for many businesses, but it has translated into a busy quarter for listed Healthway Medical Corporation.

Booming: The group has been seeing a surge in visits over the past three months

The group, which runs one of Singapore's largest primary healthcare clinic chains, has been seeing a surge in visits over the past three months, especially from students and workers seeking flu screenings and clearance.

'Numbers started peaking in April,' said managing director Wong Weng Hong. 'And it has picked up even more over the past three weeks.' But it is not just walk-in numbers which have increased.

'We are also seeing strong demand for other services such as medical screenings and early diagnosis of chronic and critical illnesses,' he said.

Meanwhile its chain of 10 dental clinics is seeing increased demand for implants, braces and other procedures, he added.

'This is all a huge surprise to us,' said Dr Wong. 'You would assume that during a recession, people might cut back on medical expenses. But the opposite seems to be happening. As a business, this is good for us.'

The company, which now has 84 clinics islandwide, recently announced a 154 per cent jump in net earnings to almost $4 million for the quarter ended March this year, on the back of a 46 per cent rise in revenue to $24 million.

Healthway had $28.5 million in cash, was cashflow positive to the count of $10 million, and had a gearing of 0.5 per cent.

Still, Dr Wong regards the first quarter of 2009 as a traditionally slow period, because of numerous holidays and the Chinese New Year period.

'The second quarter has been very different,' he said. So different that its normally quiet Bukit Timah clinic, for example, has seen an almost 300 per cent rise in patient numbers.

Part of this is due to the fact that Healthway is the largest Pandemic Preparedness Clinic chain in Singapore, providing diagnosis and treatment.

Given Healthway's patient retention rate of some 60 per cent, Dr Wong hopes many first time visitors will become repeat customers.

Meanwhile, the economic slump has also eased pressure on Healthway's operating costs, particularly manpower, material and rentals.

The group, which also includes the Singapore Baby & Child Clinic franchise, recently started expanding into specialised medical services with its first eye centre and ear, nose and throat (ENT) centre at Mt Alvernia. Over a dozen more specialist clinics are in the works as it gears towards a chain of 120 outlets islandwide. Plans are also underway for a 100-bed specialist hospital.

'Our general practice has a huge pool of patients who are a natural catchment for our specialist services,' Dr Wong explained.

Established in 1990 by Dr Wong with some partners, the group grew to 15 clinics by 1997. By 2001, it had undergone several restructurings which saw the chain double in size and the entry of new shareholders, including British insurance group BUPA and its current major shareholders, led by executive chairman Fan Kow Hin, which ultimately led to its 2008 listing.

Today, Healthway has more than 140 doctors and over 300 nurses serving a patient base of some 350,000.

Although still largely a family medicine chain, its corporate business has been growing in recent years. It now has 1,000 corporate clients, the latest being a three-year $5.9 million contract with the Singapore Police Force.

Beyond Singapore, Healthway made its first foray into China with two clinics in Shanghai, held through a Hong Kong- based special purpose vehicle.

'We see huge potential in the vast domestic market there,' Dr Wong said. 'But we won't compete with other foreign players, who serve niche markets like expatriates or corporate multinational accounts.'

Meanwhile, the company is mulling a promotion to the main board of the Singapore Exchange.

'We opted for a Catalist listing because we had not completed the audits for some of our newer acquisitions,' Mr Wong said. 'Now we are have the numbers.'

Indeed, 'the numbers' may have caught the attention of potential institutional investors. Asked about this, Dr Wong acknowledged there have been discussions with various parties, but declined to elaborate.

'Healthcare is a growth business and many people naturally want to participate in it,' he said.

Another attraction would no doubt be its relatively low valuation. At 11 cents per share, Healthway is trading at a price-earnings multiple of just eight times, which compares favourably with its four listed peers, whose multiples range from 15 to 50 times.

But investors or valuations aside, Dr Wong is confident that a year after listing, his company is positioned for strong growth.