...Thank you for joining us today at a very short notice, and so we'd like to take the opportunity to actually give everyone, you know, for our management team to be able to discuss about the proposed acquisition of Island Hospital. I'm sure many of you would know me. I'm Penelope from the IHH Investor Relations team. And so with me today, who are familiar faces to many of you out there, Dr. Prem Nair-
Hello.
who's our Group CEO. I have Mr. Dilip Kadambi, who is our Group Chief Financial Officer, and of course, Mr. Ashok Pandit, who is our Group Chief Corporate Officer. So, Dilip will cover the financial aspects of the transaction, and following that, Dr. Prem will share the strategic rationale before we actually move into the Q&A to address your specific queries. As for the presentation materials, you can actually download the deck on the IHH website under the IR tab. So with that, I'll turn the call over to Dilip. Dilip, please.
Thank you. Thank you, all. Thank you for joining at short notice this evening. We believe it's an, you know, it's a very strategic and important acquisition for us, and which we wanted to share with, you know, all of our investor community as well. I've always mentioned in the past, whenever I met you, that we will be disciplined about our M&A strategy, and we will look at four key pillars in every acquisition that we do. We believe Island acquisition is a very transformative acquisition for the group. It's a very important cluster, and you know, the four key pillars that I've always been talking about: One is on a standalone basis.
The asset has to be a high quality asset, and I can tell you, and you will see in the subsequent slides, that Island is a really high quality asset, doing extremely well, in the Penang Island. Number two, I've also mentioned in the past that, you know, we would like our acquisitions to create a network effect, meaning to say it adds to our cluster or creates a new cluster in itself. So I can, again, if you look at Island Hospital, it strengthens our northern cluster, in Penang, where we are operating at high utilization, and we are currently in the, you know, underway to expand our capacity in Penang ourselves. Number three is in terms of synergies. I've mentioned in the past, again, that synergy and value creation plan is very important to us.
We are not here to buy a standalone hospital that does not add value to our overall network or create synergy. Here, again, you will see that we have; there's a clear synergy plan that we want to drive between Island and the IHH group, which is quantified. And last but not the least, we have to be disciplined about valuation. You've seen us in a couple of situations in the past where we walked away from the transaction, while you've also seen us be disciplined about some of the valuation that we've paid, for example, in Timberland, et cetera, that we executed the transaction itself. So again, if you look at all of these four metrics, it's a clear tick. You know, it kind of adheres to the philosophy of our M&A strategy.
So with that, if you look at the overall transaction value, for a 100% stake in Island, we are paying equity value of MYR 3.9 billion. I must, you know, focus here and highlight the fact that we also have a land bank. We have vacant development capability there. And the land alone is valued at about 220 million MYR. The second thing is, if you look at our forecasted, 2024 is almost there, in terms of year-end. And if you look at, you know, forecasted EBITDA for Island, and if you look at the multiple, it's about 19 times EV/EBITDA multiple for the hospital that we just bought, right?
I must also highlight here that if you look at a one-year forward number, which is 2025, it does even better given the growth that we have seen, historically in the past, between 2023 to 2024, and we think that growth momentum would continue in 2025 as well. So, 2023, 2024, 2023 over 2024, we saw almost a 45% growth in our EBITDA, and we see some of the growth momentum continue into 2025 as well as we ramp up the hospital and fill capacity. I also mentioned there's a clear value creation plan. We've identified both revenue synergies as well as cost synergies, and we think there's close to about MYR 200 million of, you know, value creation and synergies that we can drive over the next five years.
In the next one year alone, there's a clear plan to derive value of about MYR 25 million just by way of synergies. The transaction is, you know, ROE accretive and EPS accretive in year two. I've always mentioned that, any transaction that we do has to be earnings accretive year two, maximum year three. I'm happy to state that in year two itself, this asset becomes, earnings accretive to us. From a financing standpoint, you know, I've mentioned, you know, as you know, that we have a large, organic expansion plan for our hospitals. In Malaysia, we are you know, growing our capacity by over 40%. As a group, we are building over 4,000 beds in the next four to five years.
And most of that funding, I've stated again in the past, will come from free cash flows that, you know, will that we generate from our businesses. So for this specific acquisition, we will look at some of the free cash flows and also probably look at some debt. Again, I would like to reemphasize the fact that none of the brownfield expansions will get impacted because of this acquisition. We have enough capital to do both. With that, I'll probably hand over to Dr. Prem to take us through the strategic rationale of the transaction as well.
Thank you, Dilip. Good evening, everyone. Island Hospital is not an unknown facility. I'm sure many of you know this hospital very well, right? It is a high quality, very attractive hospital in the north, both in terms of operations and in terms of clinical capabilities. It is ACHS accredited. In fact, they have two centers of excellence, oncology and cardiology, right? That is specifically ACHS accredited. Very strong outcomes, so it's a high quality asset, right? It is located in Penang, which is a very, very popular destination for medical travel. It's a fast-growing market. We are already quite strong in Penang and in the north, in particular, if you include our Sungai Petani hospitals as well, right? And this will definitely add on to our leadership position in North Malaysia. There's also considerable scope for expansion.
As Dilip has mentioned, there's land. They've built a new wing, which can grow as well. So it will really be creating a medical travel powerhouse, I would say, to support the country's aspirations. Malaysia, as you will see later in one of the slides, right, is already a very attractive destination for Indonesian patients, right? I think it also demonstrates that in our home markets, and Malaysia is one of them, we have got aspirations to grow our business. We've done some tactical acquisitions in recent times, Timberland being the most recent one, right? But this is a strategic acquisition, right, that I think will really strengthen our home market of Malaysia, right? We've done some successful M&As in the recent past. You will know about it, Prince Court Medical Centre in Timberland, right?
There's also going to be quite a lot of value created through the synergies that we have, right? Gleneagles Penang is not very far from Island. Gleneagles Penang is very strong in the local market. It's operating at a very high capacity at the moment. No scope for expansion at all, right? So we will derive considerable synergies, estimated at more than MYR 200 million over the next five years, and I think this will create considerable value for our shareholders. And finally, as Dilip said, this is going to be EPS and ROE accretive in year two. So all in all, I think this made a lot of strategic sense for IHH. Going to the next slide. So I mentioned some of these points. Very strong asset, right? 500 operational beds now. They've got 600 that's already built at the moment.
Centers of excellence in various specialties, ACHS accredited. You can see the numbers there, 430,000 outpatient visits, 42,000 inpatient visits. Average bill size, MYR 12,000, right? They've got 120 specialists, subspecialists. Majority of them are resident. Some of them are visiting specialists as well, right? So we provide various subspecialties that complement Penang. So if you look at some of the specialties here that they are strong in, as compared to Gleneagles, Penang, which is very strong in the neurosciences. Island may not have such great capabilities in the area, but they are very strong in oncology, orthopedics, right? All the surgical disciplines. So very complementary between the two of them, all right? Next slide. I think this will be familiar to you.
This is Penang Island, right, where the two of these hospitals are in close proximity. Not forgetting, we have Pantai Penang, right, which is in, Bayan Lepas, slightly distant from these two, but which is now undergoing a major refurbishment and capacity expansion as well. So I think this, together with our two Sungai Petani hospitals, will ensure that in North Malaysia, all right, we are poised for even more growth, and we continue to be a leading medical tourism player as well. Penang is, by the way, just for everybody's information, our second biggest, cluster after Kuala Lumpur. So if you look at this slide, you will see that Malaysia is rapidly becoming a preferred destination for medical travel, right? In fact, it, it is for the Indonesian health tourists, it is the second-- it's the first, top country, right?
And what will this acquisition do? It will ensure that more than one in three of medical tourists coming from Indonesia will come into the IHH network of hospitals in Malaysia, all right? And the, Malaysia's, tourism, medical travel, revenues will more than double, right? On this slide, I just wanted to put... Many of you know Island quite well, I'm sure. But this picture shows you, the depth and breadth of this hospital, right? The two wings that they have now, connected by a very, very innovative tunnel, right? That almost makes movement between the two wings quite seamless, right? You will also see the piece of land that we have that can be redeveloped further, right? Essentially, developing a major medical campus up north.... Now, synergies, there will be definitely from this transaction, two types of, synergies, all right?
While it's always easy to talk about cost synergies, because we will have savings from buying in larger quantities, all right? Group procurement, process optimization, but I think we also need to look at growth, revenue synergies, all right. One of the, I think if you look at the island, right, I think their ability to attract medical travelers from the region is very strong. And then certainly, IHH hospitals, I think, can leverage off this as well, all right, to expand medical travel to the rest of the country as well. So I think these are the quick snapshots that I have. There are some extra slides in the appendix that you can take a look at, all right. But I think maybe it'd be better if we were to take questions from the large group of you who are here.
So thank you very much.
Thank you, Dr. Prem. With that, we'd like to start with the Q&A. If you have any questions, please do raise your hands, and then when called upon, you can unmute and ask your question. Yes, and we have Huan Wen. Huan Wen, can you unmute and ask your question?
Hi. Thanks for taking my question. I have a question about cross-selling opportunities. Yeah, I mean, I think we understand that Island Hospital is a medical tourist powerhouse. I presume that part of the reason for this acquisition is trying to attract medical tourists to other hospitals in IHH's portfolio in Malaysia. What kind of cross-selling opportunities will there be, and any sort of, you know, how should we think about volumes of medical tourists there?
Okay. Firstly, even before the Island acquisition, if you look at our latest results, you'll notice that the IHH hospitals alone, where the medical foreign patients have gone up by 50%.
Fifty percent.
50%. So what this shows is that Malaysia is attracting a lot of medical travelers, right? And so IHH is benefiting from that as well. As you rightly say, Island Hospital is a powerhouse. They have finessed the seeing of medical patients in a big way, all right? If you visit the hospital, you'll see how they do it, all right? It's really a very good process that they have worked on. They have marketing, they have regional offices and all that. So I think they have really worked it down to a fantastic science and an art in terms of doing that. Our hospitals, our current hospitals will also grow as well, but I think what putting both together is really leveraging on the expertise that Island has. I'm sure our hospitals will benefit as well.
There'll be cross coverage, cross referrals as well. So I think that's what we are actually hoping for.
Thank you, Dr. Prem. Next question is from Nicole. Nicole, you can unmute yourself. Nicole?
Hi. Sorry, I just had some problems unmuting. Okay, thanks, thanks very much for taking my question. Actually, my question is more with regards to, I guess, the valuations that you're paying. And I know that you mentioned that if we were to strip out the land, the vacant land, on the site, it is valued at about nineteen times EBITDA. But you are trading at about thirteen times EBITDA at this point in time. And also, I think, Dilip, you mentioned just now that, there's a growth momentum of about 45%, going from 2023 to 2024, and I think you hope to sustain the similar kind of growth momentum going to 2025.
So I guess my question is really if you could help us understand what drove that 45% increase in EBITDA, 2023 to 2024? And I guess what would be the drivers for the sustained growth momentum that you see that would help drive a similar sort of, you know, growth rate going forward?
Sure. So if you look at, you know, the Island Hospital in terms of growth, I did mention that, you know, they've grown at 45% over last year, this year. And looking at momentum, I would be fairly comfortable to say that they will grow upwards of 20%, at least, in terms of EBITDA. So that, you know, a big part of that growth will be sustained. Where does the growth come from? A large part of that growth has come from, A, volume growth. You know, as you can see, they've ramped up from 200-odd beds to close to 500 beds, right? And we still have... And they're still operating at about 50-odd%, 55%. So we still have beds to fill, and we still have ability to ramp up volume.
That's number one. Number two, if you also look at, you know, some of the medical program, whether it is oncology or whether it is cardiology, they have, you know, substantially ramped up the medical program as well. So the intensity has also grown, likewise. So both this put together, I think sustaining a 20+% growth is something which is quite achievable, to our mind.
Yeah, I think just also to add a couple of points here. One, obviously, is our own growth within Island itself. And I think, you know, while they've added number of beds, our existing hospitals in Penang are also running at quite high capacity. So there is that opportunity to make sure that the growth momentum continues in 2025. That's the first point. I think the second point, and I think Dilip went through this earlier, when you're looking at. Obviously, we look at valuation in multiple ways, and our primary methodology is discounted cash flow, because we are a long-term strategic operator. So what does it make sense for us in terms of the long term from a valuation point of view?
... And even if you're looking and you're trying to get your, you know, thoughts around the multiples, initially we talked about value of the land, value of the synergy. And then finally, I think the last point is that, you know, we, most of you, most of the analysts look at us. They look at us in terms of Sum of Parts valuation, where different markets have different value. And I'm, I'm sure the Malaysian multiple is much higher than where we are trading on a Sum of Parts basis.
Sorry, just a follow-up question. So I think, Dilip, you mentioned that with the medical programs that have been put in place, the intensity has actually grown. And I see that you have an average revenue per inpatient of about MYR 12,000 for Island. Maybe what was it, I guess, in 2023, if you can give us that number?
Sure. So look, you know, suffice to say that, you know, if you see our Malaysian network, IHH's Malaysian network, you know, we've spoken about this in the past, where we've said, "Look, we've had high single digit growth in terms of intensity." That is true for Island as well. You know, suffice to say that we do see high single digit growth on intensity as well. And, you know, that momentum hopefully should continue, as we've seen in the rest of Malaysia.
Okay, got it. Thanks.
Thanks, Nicole. Next question is from Wee Kuang. Wee Kuang, you can unmute yourself and ask the question.
Hey, evening. Can you hear me?
Yes, we can. Go ahead.
Thank you for taking my question. Just have, probably something to look forward to. I guess, just wondering, whether there's any rush for you guys. Of course, now it's in the early days, whether there's any rush for you to open up to 600 beds, if there's any timeline to hit this 600 beds maximum capacity? And, just wondering, as you mentioned, minimal CapEx should bring you there. So just wondering if you have any kind of CapEx number in mind with regards to your, to this expansion. Yeah.
So actually, Island is a I mean, it's quite an amazing facility, I have to tell you, right? If you guys were to visit it. This is not a facility where the owners have stinted on CapEx. They are very, very well-resourced. They've got two LINACs, they've got three MRIs, they've got two CTs, they've got PET-CTs. The facility is very well-maintained. They built the extension during COVID, right? And so if you go to that facility, you'll see it's very good. We don't really have to spend too much money on this facility for sure, all right? That's so I would say that. So I think we are quite confident, right, that this. Now why 600 beds?
You, we never, in an extension, we will never put in just the number of beds that we need to, right? So you always build so that you have got growth. And if you look at Island's growth and what we project, I think it's only a matter of time before the 600 beds are filled up. We also are telling you that Gleneagles is full, absolutely full. No capacity for expansion, right? So I think what this is going to do, together with our Pantai Penang expansion, is to... I think we'll have close to, I don't know-
A thousand.
one thousand beds in Penang.
Yes. More than one thousand beds.
Yeah, more than 1,000 beds, right? So that will easily make us the dominant player for, as we grow the business.
Just to clarify, so this expansion to 600 beds is not even onto the vacant land around, right? So there is actually more room for-
Yeah. This existing bed capacity.
Yeah, this is all built in.
Built in. Built in, right.
Thank you so much. Thank you.
Right. This is what we said earlier. I think when you refer to our presentation slide, which Dr. Prem showed earlier, there are additional three other plots that give us additional opportunity to, you know, expand, and so I think that's where we talked about the valuable land bank that's available there, which is very scarce, if you're aware, in Penang Island. So this is indeed a rare commodity for us, and this is, like I said, the upside with it.
Very little or no CapEx is required to scale up to speed of 600 beds.
Yeah.
Okay, thank you so much.
Thanks, Wee Kuang. Next question is from Puja. Puja, would you like to unmute yourself and ask the question?
Sure. Thanks. Hi, everyone. So I understand that Penang is a good land parcel with high medical tourism. I just wanted to understand why the occupancy levels are at 55% right now, if it's such a good asset versus the other existing hospital of IHH, Gleneagles Penang, almost running at full capacity. That's my first question.
I think two or three points here, Puja. One is obviously the capacity ramp up has been, you know, quite a lot over the last 12 to 18 months. Second, you've got to look at this asset attracts large number of medical tourists. So the capacity actually varies during the week to some extent. So you've got very high capacity utilization on Tuesday, Wednesday, Thursdays. Patients come in, especially the international patients, come in on Monday, and then over the weekend, it's lower. So that's one aspect. The second aspect is that for us, this means there is a very attractive growth opportunity. Like you said, some of our hospitals are already running at full capacity.
So I think for us, it is a very good structure currently in place because we can extract the best out of, you know, some of the days during the week, but also look at-
... filling those extra beds through the IHH network.
Yeah, and maybe just to add, Puja, if you look at, you know, two, three years back to now, we've almost ramped up 200 beds. That's a lot in two years' time, if you know what I mean, right? So any hospital that, you know, and you, you'd appreciate that, any hospital that's on ramp-up phase typically has about, you know, 50-60. You know, and when you hit a 60% mark, you open a fresh ward, right? To ensure that we're able to cater to the peak load during the week. So I think that is something that we need to keep in mind. So, this actually we see as a great opportunity going forward.
In fact, what I anticipate, if you look at the proximity of the two hospitals, I think they're just a stone's throw-
Mm.
away from each other. I think there are days when Gleneagles, Penang, is extremely full, and I think this provides us now with an opportunity to decant some of the patients-
Mm.
from Gleneagles, Penang. And, you know, you never know when we are losing patients, if you have no bed means the patients goes to another hospital, right? I think so this is an opportunity for us really to decant patients into, to Island.
Thank you. That's helpful. If I may, I have another question on valuations. I understand that we've done a DCF, but for the valuation multiple, what are the benchmark hospitals considered, which justifies these multiples that we have given? Thank you.
So I think, Puja, we, you know, like I've mentioned, for us, long-term strategic operator, DCF makes more sense. But we do look at comps. And if you look through a lot of the transactions that are being done in Malaysia, and I think most of the analysts on the call would be familiar with this, these numbers. Ramsay Sime Darby was one that was done recently. It was 20.1 times, I think. Columbia Asia was close to 24 times. Prince Court Medical Center was done at 21.9 times. So there are a fair number of transactions in Malaysia itself, which are probably the most relevant for us to look at, in terms of, you know, direct comps.
Yeah, and maybe just to add, Puja, if you look at, you know, trading comps as well, right? And if you look at, you know, and as Ashok mentioned previously, if you look at specific Malaysian plays or, you know, specific trading multiples for, you know, Malaysian-listed companies, and if you were to look at even some of the parts that, you know, analysts have ascribed to, you know, our Malaysian business, it is in the range of, you know, somewhere between 17 to 19 times. So again, it is pretty much in the ballpark of, you know, our trading multiple as well, should we, in the future, look at listing Malaysia alone. So I think it's pretty competitive and comparable.
And I think just going back to this, so we are talking about 2024. But I think what we highlighted earlier as well, there is a land parcel that is valued. There are clear synergy, you know, that we have outlined and highlighted to the analysts and investor community in terms of next five years. So, you know, when we are having the same conversation same time next year, I think the story and picture is gonna look quite different. And I think, as you take all these sort of factors in. And like, you know, the attractiveness of this asset, while we can...
We are looking at a growth opportunity. What we are also very clear that the ecosystem they bring in, in terms of medical tourism, that provides a very unique opportunity for IHH itself, given our network in Malaysia. Malaysia is one of the largest destinations of medical tourism.
You know, maybe just to draw a parallel, I think this probably may help all of you as well. When we acquired you know Prince Court Medical Centre in Q3 of 2020 just to give you some statistics right their EBITDA margin was at probably 10%. Currently, we are in upwards of you know 20%-23% number one right? If you look at the CAGR revenue growth from 2020 to 2023 it's at close to 16% in terms of CAGR revenue growth right for Prince Court Medical Centre. If you look at the CAGR of you know EBITDA it's upwards of 50% right? Very clearly it gives us the ability to you know A ramp it up.
And similar to Prince Court, it also gives us the ability to ramp up and integrate quite nicely with the IHH network.
Actually, if I can maybe add on another point to Dilip, and maybe, Dilip, you can elaborate more. I think, earlier, someone asked about the key drivers of, you know, growing this business. I think particularly when we talk about medical tourism powerhouse, the fact that we are getting a lot of Indonesian patients, but I think in one of the slides, we talked about Indonesian patients not just coming from Medan, but you know, increasingly opening that funnel, of over 30% that's coming, also coming from Jakarta, Surabaya, and, you know, the rest of Indonesia. So I think, again, supporting, you know, Malaysia's medical tourism aspiration. So I think this is a very powerful-
Yeah.
story that we have here.
Yeah. And look, you know, this is something that, you know, the Island team has built over three decades.
Mm-hmm.
It's not something that was built yesterday or the last couple of years, right? They've spent literally three decades building this network across Indonesia. So that gives us a huge potential to unlock that, not just for Island, but across the IHH network.
... Actually, I think that's a point worth emphasizing. Penang hospitals have always been known to attract patients from North Sumatra, right? Medan and Aceh, in particular. But Island's very interesting because a third of its Indonesian patients come from North Sumatra, another third come from Java, all right? Which is, by the way, a traditional place for patients coming into Singapore, right? And another third from the rest of Indonesia. I don't think there's any hospital in Malaysia or in the region that has got that sort of attraction across Indonesia. It's quite an amazing statistic.
Thank you. I see a lot of hands raised, so I'll rejoin the queue.
Thank you, Puja. Next is Alex. Can you mute your line and ask your question? Alex? If not, maybe I move on, Alex. Maybe I'll come back to you again. Maybe Kok Xiang, would you like to unmute and ask your question?
Hi. Thanks for allowing me to ask question. There are several question. The first question is that the EBITDA that you used to derive the EBITDA of thirty-four point six times, any one-off item inside this EBITDA?
No, none. No one-off items. These are operational EBITDA. You know, again, as I mentioned, we have very clear sight of 2024, and the growth momentum should continue, you know, at over 20% going into 2025 as well.
Okay. I just want to understand the asset. Can you share with us the latest EBITDA margin, PAT margin, and also the ROE? And also, what is your target EBITDA margin, PAT margin, and ROE in the coming two years, like, in 2025 and 2026?
So look, what I can say is, it is very comparable to, you know, our margin. In fact, it's slightly above our EBITDA margin. And, you know, it is, you know, from an ROE perspective, it again meets our hurdle rate while we integrated into our overall network. So we're very, very comfortable with both the quality of earnings as well as the sustainability of those earnings.
Yeah. I think just in general, we don't give forecasts, and we've never done so far, so no comments on 2025 and 2026 numbers.
Maybe I don't want the forecast. Can you give me the latest margin for EBITDA, PAT, and ROE, the latest one?
Look, suffice to say, as I said, you know, it is at or above our other assets in Penang, and you know, we believe that the margins can be sustained at those levels going forward as well.
We have Scott Sell. I think this profitability question. I think we just announced this acquisition. Maybe till the closing, we perhaps can share a little bit more-
Yeah, sure.
about this stage.
So my next question will be, does the Island Hospital management team still remain with Island Hospital, or you will change a new management team?
No, Island's got a very good management team, right? I think there is some opportunity for us to rationalize, right, with our Penang or our other hospitals. But our intention is clearly to keep the current management team there.
Also just to add, you know, look, it is ramping up quite fast, right? Which means, there is actually, you know, even if there are ahead, you know, FTEs there, we can utilize it, you know, across our networks. Bear in mind, apart from Island itself, our Pantai Hospital Penang also is expanding beds. So we really have the need for the FTEs to kind of grow both the facilities.
Also, I think it's just be mindful about the fact, I think for some who have actually visited Penang and even Island, you'll notice that that's two wing, and obviously, they've just built up that new wing, which I think opened up somewhere in November 2022. So obviously, at this present point, they are still very much in the ramp-up state. Of course, I think sometime in twenty twenty-five at least, they'll probably hit their steady state.
Yeah.
Yeah.
Yeah.
One last question is that, can you walk us through, you know, the, how do you derive the synergy value of MYR 200 million over five years? Because it's, like, MYR 200 million compared to your market cap, like, MYR 50 billion is a bit small.
Okay. So look, I think, what I can tell you is that, you know, the MYR 200 million is a number that we have actually, you know, worked. We have a very detailed value creation plan, across all those four buckets, right? We, you know, we have two revenue buckets, you know, in terms of driving synergies, and we have two cost buckets. So these are bottom-up plans that we've come up with. We clearly know that this is a MYR 200 million that we can definitely achieve. And, bear in mind, this is going to have a positive uplift on the EBITDA over a period of time as well, right?
So I think suffice to say that MYR 200 million is something that we're very, very confident to, you know, stick our neck out on, and it's based on a bottom-up plan. It's not a number that we've just picked up and giving here, but it's a very, very detailed plan that we have, value creation plan that we have actually worked with the teams on the ground.
Okay. Thanks. That clarified. Thanks a lot. I return back to the queue.
Thanks, Kok Xiang. Now I can see Alex, you can unmute yourself and,
Okay. Sorry, I could, I'm having a bit of difficulty in unmuting myself just now. Okay, I just have a few questions. It's regarding the MYR 223 million land, vacant land. Do you have the actual acreage? Just want to find out what is your, the per sq ft? Is it?
... Yes, we do have the actual acreage. I can come back to you,
Yeah, maybe let us check, and then we'll come back to you maybe before the end of this call.
Okay.
Yeah, that would be wonderful. Yeah. And also, for the first half of this financial year, do you have the numbers for Island Hospital's revenue, EBITDA, and net profit?
So I think to your first question, I think it's 120,000 square meters. I think on your second question, I think like Penny mentioned earlier, you know, over the next few days, the next few weeks, should be able to come back to you with this. We've just announced the transaction today. The closing is in October. And I think some of these issues will get addressed when we have some more, you know, detailed conversations with all of you.
Okay, and also, what is currently Island Hospital's net debt?
If you look at debt, it's mentioned there in the slide. It's about MYR 270 billion in terms of debt.
Okay, great. And, what is the percentage of medical tourism that accounts for the revenue for your, for first half of twenty twenty-four?
Yeah, uh,
55%-60%.
About 60% of the total, out of the total revenue, about 60% roughly is account for medical tourism.
Okay, great. Thank you so much.ko
Thanks, Alex. Next question, perhaps we can have Xian Wei. Can you unmute and ask your question?
Hi, sure. Thank you for taking my question, and congratulations on the acquisition. I just note earlier that you mentioned that your acquisition will basically be funded by a combination of external and internal funds, and I understand the question that I'm asking may be a bit private at the moment, but would you be able to give us any sort of color on what that composition to be, would be? That's my first question. And my second one is then, post your acquisition, what are you looking at in terms of your retained profits and cash flow after your financing cost? So that's it from me. Yeah, I'm happy to hear your thoughts on my queries.
So on the first question, what I can tell you is, you know, we are, as you know, we are a cash-generative business. We do generate, you know, a fair bit of cash, and, you know, if you were to just look at, our debt across various countries, and I've mentioned this in the past, you know, if you take our total debt, our, you know, net debt, you know, one third of that, you know, typically comes from Life REIT. Another one third are lease liabilities, and the remaining, bulk of it is, you know, contributed by two countries. One is Hong Kong and the other is China, right? So most of our balance sheet across all the other countries are pretty much debt-free at this point in time.
A, we have the ability to leverage, while we want to leverage, we should also be conscious of the fact that we utilize our own funds first to reduce any cost of debt, right? We are looking at it carefully. Suffice to say, leverage will probably be in the order of somewhere between 60-70%. The remaining, we'll probably fund internally.
Oh, thank you for answering first, my first question. Maybe the second one, in terms of, what's your outlook for your cash flow and your retained profits post-acquisition? Yeah.
Sure. So look, you know, from a cash flow perspective as well, you know, we, as I mentioned right at the outset, we are a cash-generative business, and the entire, you know, 4,000 bed expansion plan that we have for the group is something that our cash flow can very sufficiently fund over the next four years' time, right? So given that, you know, the leverage that we have here is something that, you know, again, we would be able to service from our Malaysian business itself. So it is not one versus the other, but we can actually do both, both in terms of brownfield expansion, using our free cash and the acquisition using debt, and service it through the free cash that we generate as well. Can I just...
You know, there were some questions around revenue and net profitability. In our Bursa announcement, we've included this on page thirteen, so those details are available on that in that document.
Thanks for taking my question. Thank you.
Thank you. Perhaps next one, I will go to Yen. You can unmute and ask your question.
Hi, thanks for taking my question. It's really around the revenue per patient that is about MYR 12,000. That's about 20% above of what IHH Malaysia is having. Now, given that, Island Hospital is more tailored to medical tourism, this question is, how does that compare to your current existing hospitals that are more medical tourism geared? And then if I were to compare this to IHH, which are more medical tourist related, they could essentially charge a higher premium. So is this a matter of, Island Hospital not having enough equipment, for example, or is that capped by the mandated doctor fee? I just wanna confirm, is that the capped-mandated doctor fee for Malaysia still at 30%, three zero? Thanks.
So if you look at the, you know, average, you know, inpatient admit revenue, the MYR 12,000 that you're talking about, so the Malaysia numbers that IHH you know represents has all the clusters in it, right? You have, you know, everything starting from, you know, Johor to Klang Valley to, you know, even the northern cluster, right? So it is a, you know, it's a mix of all of these, and also tier one hospitals and tier two hospitals, right? So the MYR 10,000 is a number that is a, you know, is a combination of all of that. So this clearly, Island Hospital, which has MYR 12,000, is fairly comparable to the cluster that we operate in. And we believe that that's a number that's quite sustainable going forward as well.
In fact, you know, in our Q2 numbers, we shared recently our Malaysia average is about 10,700.
Yeah.
Yeah. And typically, foreign patients, due to the nature of their condition, sometimes they take a bit longer. They may have consulted a doctor locally, and by the time they come to a destination hospital, the bill size tends to be higher simply because of the complexity of the condition. So it's not unusual. And I think that's reflective of Island's foreign patient numbers.
Okay, so a quick follow-up. What potential upside can we see on that MYR 12,000 number?
So yeah, so as I mentioned previously, we've seen, you know, even if you look at our Q2 numbers, we've shown about roughly 7% intensity growth. I think intensity growth is something that will continue to happen, right? Mainly because of the fact that we are seeing more complex cases, and we are actually investing in some of the, you know, what do you call?
Medical.
Medical equipment, and in terms of, you know, clinical talent that is able to do some of the more complex procedures. You know, again, for example, if you look at Malaysia, Malaysia is focused on, you know, emergency medicine over the last, you know, few years, and we can already see that paying off as well across our network. So I think the intensity is something that we would continue to see in terms of growth, mainly driven by, you know, higher acuity patients coming to us.
Yeah. And I think we've mentioned this in page four as well. This is a very attractive asset with great clinical capabilities. There were nine COEs and two that are ACHS accredited. So we will continue to see some, you know, high quality work being done through these hospitals.
Sure. And also, if I can point you to slide number ten, where there are nine COEs and they're still expanding. Also, the fact that they have key medical equipment, from two cath labs-
Uh-huh.
to the new MRI. So cutting-edge equipment, and that, to Dilip's point, continues to drive the revenue intensity.
Yeah. And again, reiterating the fact that, you know, there's actually no CapEx that is required to further go into the hospital. We are very happy with the kind of, you know, equipment and the kind of quality of equipment that they have already.
Does that answer your question, Yen?
Yes. Thank you very much. Thank you. Yes.
Great. Maybe we can go back to Nicole. Nicole, you raised your hand?
Thanks very much. Actually, my question is just around. I think you mentioned just now that, you know, for Island Hospital, they have built this business over three decades. They have a very unique composition of Indonesian patients. You know, a third coming from North Sumatra, a third from Java, and the rest, another third coming from the rest of Indonesia. So my question is really, what do you think they do so well? And, I guess, what is it that they do differently from what you do, you know, in trying to attract the Indonesian patients? I mean, hardware aside, you know, is it that they have a stronger network or what is it that they do?
So I think there are a number of things that differentiates hospitals, you know, attending mainly to local patients and those attending to foreign patients, right? I think Island Hospital started in an era where there were already strong local hospitals, and I think they made it their point. Because, remember, it was a physician-led hospital, right? Eleven of them left another hospital in Penang to start this hospital, right? They were the founders, and they had to come up with strategies to fill the hospital, right? And I think they knew full well that the other hospitals in Penang were getting patients coming from Medan. There are a lot of similarities between Medan and Penang, right? Most notably, the Hokkien-speaking populations in both places. So I think they decided to go for the foreign market, right?
While the other hospitals in Penang and Malaysia were focused a lot on the local, local patients. Now, attending to foreign patients means your processes will have to be very different. If you look at the health screening center, it is one that patients can come in the morning, fasted. They do everything, all the tests, see the physician. The results come back in the afternoon, and they would see a specialist, and that's the point I think that, Dilip was trying to make, where a lot of their work happens from Mondays to Fridays, when the foreign patients come in. On weekends, it's downtime, patients go back, right, so over the years, they've finessed it. The doctors, right, are tuned to it, right, so the processes are actually very, very different.
And I think that's something that they really have fine-tuned very well, all right? You can see that in the way they operate if you visit the hospital.
All right. Thank you.
Nicole? Okay, now,
Thanks.
We will go back to Wee Kuang.
... Hi, thanks for taking my question again. Yeah, I just wanted to check, I mean, in terms of staffing-wise, is there any challenges? Do you see, do you foresee, like, given... I know that resources is something that you can share across your network now, but do you find that you might have challenges to fill out the expanded capacity that you have today? Yeah.
So we said, well, we spoke about the specialists. They actually got the largest pool of specialists in Penang, right? So they do have a lot of doctors. They've got a very good supporting base of about 800 nurses, right? Total strength is 1,500. So our impression is that it's fairly well-resourced at the moment, all right? Well, you know, nursing issues, I think, will crop up from time to time. That's a worldwide issue, and they've coped with it, I think, quite well. So no manpower resource issues as far as we are aware of.
All right. Thank you. That's very helpful. Thank you.
Thanks, Wee Kuang. Alex, you can unmute yourself and ask the question.
Thanks, Penelope. Penelope, I've just one final question. It's regarding your foreign tourists. You mentioned it's 60% of the revenue, and can you give us a breakdown from which country are they coming? I know you've mentioned Indonesia, but how about Thailand and the other Southeast Asian countries?
Yeah. Look, I think, you know, I would say a significant part, or probably ninety over percent, is from Indonesia. So, you know, they and the beauty, as Dr. Prem mentioned, is Indonesia. It's not just, you know, Medan, but it's Medan, you know, Surabaya, Jakarta and beyond, right? So it's fairly well-spread across the whole country of Indonesia, and 90% of that is all Indonesians in terms of foreign patients.
Okay, great. Thank you.
Thank you, Alex. Maybe, Sue, you wanna ask your question?
Yeah, can I please? Thanks. All right, just that if everyone, if I were to look at your second quarter slides, your Malaysian EBITDA margin is 25%. If you were to just isolate and look just in the cluster of Penang hospitals, is it around that level or higher?
It'll be, it'll be. So it'll be higher. As you know, you know, Penang, you know, the margins are better, so it'll be higher in Penang.
Okay. And then, but the piece of land that comes together with this acquisition, what are your plans for this? As in, when would you be looking at the brownfield expansion for this? Any timeframe that we could expect?
Oh, I don't think we're in any hurry to plan anything for the land. There is currently enough capacity in Island Hospital. We'll take it as a very attractive piece of land in the Golden Triangle area of Penang. It's smack in a very, very great good part of Penang, I would say. All right? So no worry. Yeah, we will-
Okay.
Once we've taken over the hospital, we'll see what we can use the land for.
Right. And maybe the last question is, what's your estimated market share in just Penang alone now, with Island Hospital, in terms of beds as well as, yeah, mainly in terms of beds?
I don't think we have a ready answer for that. At some point, we will let you know.
Okay. All right. Thank you.
Thanks, Sue. I know we have one question from,
Yeah.
Yeah, it's from Esin. It's basically, can you share the operating stats, number of occupancy, operational beds, occupancy rates, revenue share, percentage of medical tourism for your current Gleneagles Penang and Pantai Hospital Penang? Maybe, Dilip, you wanna take that question?
Sure. So the first question is?
Operating stats.
Operating beds.
Operating beds. So it's about roughly 300 operating beds. In terms of, you know, utilization, again, varies from month to month, but I can very easily say it's upwards of 70% in terms of utilization. Revenue from medical tourism, actually much lower in GPG. GPG is somewhere in the order of about 20%-30%, again, based on when we look at it. What else?
Her second question is, how much more CapEx do you expect if you were to build that 400 beds capacity for Island Hospital?
Yeah, I guess it's too early at this point in time. I think, you know, we are at 500 beds, operating at about 50 odd% utilization, plus we have another 100-bed to go.
Mm-hmm.
I guess the focus would be to now ramp up Island itself to a comparable 70% utilization before we can start thinking about, you know, building more at that site at this point in time.
Yes. Thanks, Esin, for your question. I know we have about five minutes left before we need to end the call. Any last burning questions from anyone? Any hands which to be raised? If not, maybe-
Sorry, sorry, Penny. Sorry, Penny, I've got one.
Okay, sue. Yes, go ahead.
Yeah, I mean, I know this, I know this acquisition is not that big, but would you, in any case, have any changes to the dividend policy going forward, assuming you do another more, about one or two more, for example?
You know, sue, great question. You know, you know, we've been, you know, mentioning this to all our investors, you know, the dividend policy last year, it was a conscious call where we ensured. You know, we did two things, right, last year, if you recall. One, we improved our payout ratio to say at least 30%, right? So that's not gonna go anywhere. I think that's something, that's a commitment that we've given to our shareholders, and we'll stick by it. We've also, last year, if you remember, from time to time, we evaluate whether there is excess cash, which cannot be immediately deployed, then we give it back to shareholders in terms of special dividend, which we did last time when we sold IMU last year, right?
So from a dividend perspective, the 30%, you know, dividend policy is something that we will definitely adhere to. I don't think that's going anywhere. And again, time to time, we will look at, you know, the cash that we have and see if we do not have a need to deploy it anywhere quickly. You know, that's, that's the other, you know, avenue to kind of declare dividends at that point in time.
Okay. Thank you.
Thank you. I think that's the end of the questions, but before we wrap up this call, one minute for Dr. Prem. Sell the story.
Okay. So I think we have what we've emphasized is that we have bought a really high quality hospital, right, in Penang and in Malaysia, if you ask me. Probably, in my mind, the last of a large format hospital that's available for sale, right, for many years to come. This fits very well into our northern cluster, Penang northern cluster strategy, as well as for a whole of Malaysia. It provides. It's very complementary to our Penang hospitals, which are predominantly focused on local patients, right? But I do think that this acquisition will transform IHH into a much more medical travel-focused hospital group, right? So, I think we wanted to make sure that we'd be able to meet all of you this evening, soon after we did the announcement.
I'm really very glad for the enthusiastic response. Yeah, I don't know how many of you here, a 100, maybe. A 125.
105 .
105.
105 of you here, right? I think this is the biggest call that we've ever had for a long time, all right? But very glad. Thank you for your questions. I'm sure you will have many other queries in the days to come, all right? Our team stands ready to speak to you all anytime. Thank you very much.
All right. Thank you, Dr. Prem.
Thank you.
Thank you, Dilip. Thank you, Ashok.
Thank you.
Thank you.
With that, we'll end the call. If you have any questions, feel free to reach back out to the IR team, and you know where to reach me and Joshua. With that, thank you very much and have a great evening ahead. Thank you.
Thank you.
Thank you.