Earnings Call: Q1 2021

May 31, 2021

Ladies and gentlemen, good evening and welcome to the First Quarter 2021 Financial Results of IHH Healthcare Berhad Analyst Briefing Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, the 31st May 2021. I would now like to hand the call over to your first speaker today, Ms. Panetta B. Koh from Investor Relations at IH. Please go ahead, Ms. Koh. Thank you. Good evening, and welcome to IHG Healthcare First Quarter 2021 Earnings Call for the period ended 31st March 2021. Thank you for joining us today. I'm Vanelope Koh from Investor Relations. With me on the call are are Doctor. Kelvin Low, Managing Director and CEO Joerg Arleigh, our Group CFO. We also have our colleague, Evren, who is the Head of Strategic Planning and Investments from Archibaldan, who is with us on the call today. So for all of you for those who are on the webcast, you will be able to view and download our presentation slides and press release. The materials are also available for download on the IHH website. As for the sequence of events, Doctor. Lo will share with us the key highlights for the Q1 2021, an update on the COVID-nineteen related initiatives and the operational performance of the group. Thereafter, York will provide the financial performance before we have Doctor. Luo to wrap up by discussing the key outlook for the group. We will then have a Q and A session after the presentation. So with that, I'll turn the call over to Doctor. Loh. Doctor. Loh, please? Good evening, everyone. Thank you for joining us again for this analyst briefing and this time around for Q1 2021 results. I hope everyone is keeping well and staying safe at home. You would have read about the resurgence of COVID-nineteen in many parts of the world, and of course, this has led to movement restrictions being implemented in some of them. In particular, amongst the markets we operate in, India is particularly hit with the recent large spike in COVID cases. Many of our colleagues know of a family member, relative or close one who is suffering from COVID-nineteen and may even have succumb to it. It has been a stressful and painful time for our friends in our India hospitals who are battling the virus and trying their best to cope with the situation. We want to assure them that they are not alone in this fight, and all of us at IHH will stand by them and support them through these difficult times. I've said before and would like to reiterate again that IHH will continue to play our part on the front line of this war against COVID-nineteen. Our frontliners and colleagues throughout the group have been working tirelessly to serve our patients and communities in partnership with the government, driven by our vision to be the world's most trusted health care services network. I have no doubt there will be challenges to our business that will come from the tightening of COVID-nineteen measures. But together, I'm confident that we'll pull through this crisis of our lifetimes. We have not let up on our efforts against COVID-nineteen. As you know from the beginning, we were involved in preventive measures, software screening, doing testing and of course, we have been treating patients as well during every spike of the pandemic. We will pick in many more patients. Of course since I last spoke with you, we have now commenced vaccination in basically all our home markets. You can see all the drives here ongoing in Malaysia, Singapore, Turkey and India. As we face up to the challenges of COVID-nineteen, we have not lost sight of the need to provide quality services for our patients to earn and build on trust they have in us. In Slide 5, in GHK, we recently launched the first of its kind hybrid hypertension care program, which combines face to face and online consultations so that our patients can have holistic care via this telemedicine platform. In Malaysia, our laboratory also received accreditation from the College of American Pathologists, which is one of the gold standards for laboratory services. With that, I will pass on the session to our Group CFO, Yorg, to take you through the Q1 financial performance. Okay. Thanks, Kelvin. For this, let's jump right in. We are looking at a fairly strong performance with a lot of resilience and delivery of COVID-nineteen related services. Our revenue in Q1 has been ZAR3.9 billion, that's 11% up versus Q1 2020. We are EBITDA with a slight reduction from Q4 2020, but a strong improvement compared to Q1 2020. In fact, we are ahead of 2019, EUR 961000000, 31 percent up versus Q1 net operating income. We have a little bit we were changing the naming convention a little bit. It's net operating income is the what we called previously the Pat Me excluding extraordinary items. So net operating income is EUR 336,000,000 up 77% versus Q1 2020. We are above 2019 Q1 as well. And what you can see here nicely on the chart is how we came out of the trough in Q2 2020 and performed here quite well ahead of even 2019 performance. Of course, a lot comes from COVID-nineteen services, and we'll hear a little bit later in Singapore and in other markets around that, but we see a very strong earnings contribution. Net income as reported at EUR 376,000,000 that's 2 17% from Q1 2020, but there were several one off items in Q1 2020, EUR 400,000,000 impairment of hospital in India of EUR 60,000,000 negative FX reserve from our Gucendani investment and some negative FX effects out of our Turkey lira exposure. So overall, very strong recovery. However, we do want to caution, we are not through COVID. We see 3rd and 4th waves going through countries. We have all of us have just informed that from tomorrow, I think Malaysia goes on another motion control order. So I think we all have to be very what is happening here going forward. We feel at this stage quite comfortable with the strength of our COVID related services that we're providing. In this context, we are also happy seeing that in several markets, tourists are coming back. Turkey is one example. The European business is doing very well, another example. So I think we are in a fairly good position there. If you go to the next page, 11, we have continued progress on our refreshed strategy. We are we have divested our Apollo the capital gains out of this in our Q2 results. And look at the same time, we are investing into priority markets like in Eastern Europe that belongs to a strong Archibadim network. Here, we've invested in Serbia and a small little hospital that works very closely with the great infrastructure we have in Turkey to refer complex cases, but also is immediately earnings accretive and it adds to our foreign currency income. If you look at capital efficiency ratios, of course, this is all on the back of our strengthening EBIT performance and our net income performance, return on equity in Q1 has reached 4.5 percent, so much for our ROE doubling journey. I think as we said, and Kelvin is going to share a little bit later on this as well, it's a journey and the doubling is, of course, a waymark and not the end of the journey. Net debt to EBITDA has further improved. Net debt to equity has improved, and our return on capital employed is now at nearly 5%, also great. You see two lines here in the ROCE in the net debt to equity and net debt to equity revised, we are in the process of redefining our definition of net debt. Until now, debt did not include lease liabilities arising from IFRS 16 accounting principles. We are correcting this and will include long term lease liabilities into our definition of net debt or debt. And of course, we will also include then right of use interest into our interest calculations. But overall, very strong balance sheet, actually stronger even than in Q4 and looking forward with a very strong cash generative nature of our business, a cash conversion rate that is nearly 1. We plan to continue on this healthy stream. If you look at earnings structure, if you look at the revenue on the next page, if you look at our revenue and EBITDA contribution, of course, Singapore still remains a very strong revenue contributor, still with 43% in Q1, the largest EBITDA contributor. And we plan to keep it that way, at least an absolute contribution, but we will see other markets here. You see Europe is now an equal revenue contributor, a little bit lower EBITDA margins in those markets, but you see a well diversified earnings portfolio. And look, the small little dark negative line, we are working towards removing Hong Kong from this. As we discussed, Hong Kong will move into the above 0 line. China still remains below for some time. I think that's expected in ramp up scenarios, but I think we see a much healthier earnings structure going forward. And with this, I give back to Kelvin to some operations update. Thanks, Yolg. So on Page 16, you can see that quarter on quarter inpatient admissions haven't fully recovered across all countries. This is to be expected. There are still domestic electives are still not necessarily fully back. And of course, in some markets, especially Singapore, there is a still significant impact of lack of medical travel. But as you can see here, the revenue intensity is strong. Those effective cases that do come are really the sicker patients, which need bigger procedures and of course that gives higher revenue intensity. In Malaysia, Slide 16. So Malaysia's performance was impacted by the MCO implemented from January 2021. Revenue has improved 10% to CNY 612,000,000 due to the inclusion due in part to the inclusion of contribution of Prince George Medical Center. And of course, there's also revenue increase significantly from our Bantai Laboratories due to more COVID-nineteen tests performed. Inpatient admissions fell 30%, while revenue intensity grew 37.6%, average occupancy again because of the MCO situation in Q1 was at 23%. On Slide 17, Singapore. So in Singapore, we saw a firm recovery. Domestic patients continue to recover. Foreign travel is not back. Still a significant contribution from COVID-nineteen related services. So you can see here that quarter 1, 'twenty one versus the same quarter last year, revenue actually grew 14% to RMB1.16 billion. EBITDA was up 27% to RMB417.5 million. Inpatient admissions decreased 3%, while revenue intensity fell 1.7%. Average occupancy was at 54%. So you can see that the despite the medical travel being not back, as I've said, there's been a fair bit of recovery on the domestic emissions. On Slide 18, Turkey and Europe, certainly a strong recovery in Q1, revenue improved 11% to ringgit.1 billion, EBITDA grew 29% to ringgit. Inpatient admissions was marginally lower, but revenue intensity increased by 28.7%. With more complex cases undertaken and of course some price adjustments roughly in line with inflation. Average occupancy was high at 75%. I would like now to discuss briefly our non lira exposure on Achibatam. Since Q3 2019, Achibatam periodically entered into cross currency swaps to convert €180,000,000 of bank loans into Turkish lira. These cross currency swaps relating to €9,800,000 of bank loans were settled along with repayment of these loans in Q1 'twenty one. So in Q1 'twenty one, the group recognized about RMB99 1,000,000 of exchange loss on translation of the remaining non Turkish lira balances, but these were more than offset by a RMB156 1,000,000 fair value gain on the cross currency swaps. So as a result, there was a net gain of ring57 1,000,000 recorded for Q1 'twenty one as compared to a net loss of ring80.9 million for Q1 'twenty 20. Moving to Slide 19 on India. So we saw a recovery in India in Q1 on the back of rising the non COVID services as well as COVID related services. Revenue grew 11% to RMB830.6 million. EBITDA rose 68% to RMB116.4 million. Inpatient admissions decreased marginally by 2%, revenue intensity increased 15.2% for the same reason I mentioned, patients with more serious and urgent ailments, and average occupancy was at 62%. Moving to Slide 20, Glenigar Hong Kong. So Glenigar Hong Kong continue to ramp up as we saw revenue increase 32% year on year to ringgit, and EBITDA losses have narrowed by 42 percent to ringgit24.8 million. Inpatient admissions increased, healthy 16%, revenue intensity also increased by 11%. Most of that really is driven by that increasing trust in the hospital, improved ability to attract complex cases and then doctors doing more complex cases there. Occupancy was for the quarter at 56%. So to summarize, moving on to Slide 22, you can see that recovery has been continued since June when we took the June 2020 when we took the brunt of COVID-nineteen when it started around March, April last year. There is a recent resurgence, as you know, and this will certainly present some near term headwinds. Moving forward, we will continue to maintain discipline in executing our refresh strategy. We will stay nimble. Our improved structure of our P and L has been explained will enable us to be more resilient even as there are bumps in this pandemic. We continue to proactively deliver on our strategic pillars. As you see here, they have served us well in the past year. And we also said, following on that strategy now specific markets, we will fine tune, sharpen this strategy so that we can sustain our earnings growth. And we have pivoted, as you know, to create new revenues, improve case mix and we'll continue to do so. So with our strong financial position at this point in the pandemic, we believe we are well placed to ride out the rest of the pandemic and our long term growth trajectory remains intact. Now before I take questions, I know there have been interest around our ROE target and I just want to touch on that here on Slide 23. The question is how do we get to that target? You can call it you all call it a along the way target, I suppose, of 5% doubling from where we were at the end of 2019. So here is a sense of how it stacks up. The various building blocks post COVID recovery, some of that domestic volume coming back, some of that travel coming back, reduced losses from entities which were previously not performing so well. I think you can see that, are doing that in our operations in India, in Hong Kong, for example. Improved productivity, driving through the synergy that we have been talking about. And again, we did a fair bit of that already in 2020. And then beyond the COVID recovery, continue to fill out a bit, so improve the occupancy of existing base. That per se, of course, is a capital efficient way to grow. And beyond that, then we look towards new revenue streams. The new revenue streams will be growth beyond our existing facilities, as I've mentioned before, growing via our cluster strategy in our bricks and mortar part of our business, growing a very important book of business in our laboratory space, which today has been accelerated and other types of services as well, including digital health. So some examples, you can see on Page 24 in terms of what some revenue streams in COVID-nineteen times, we have now done more than 5.2 we have done more than 5,000,000 COVID test across laboratories in all our markets. In fact, in May alone, Parkway Laboratories in Singapore passed the process about 1,000,000 PCR swab tests. All these are important milestones and it's a testament to our ability and continued support to countries that we operate in to fight this pandemic war. So the fight is not over yet. We will continue this good fight, continue doing testing, continue taking patients and of course, helping to run the vaccination rollout journey. With that, I will hand open the floor to Q and A. Thank you very much. Thank you, Doctor. Luo. We'll now take your questions. Just a quick note before we start, we'll take questions from the participants on the conference call before moving to the questions from our webcast participants. So if I would like to request participants to keep you about 2 questions. With that, operator, please proceed with the Q and A. Thank you. Your first question comes from Dhivya Gahan from Morgan Stanley. Please ask your question. Yes, thank you very much. Good evening and thanks for the presentation. The two questions from me. The first is just a clarification on the one off finance income that you booked in this quarter. Just wanted to get that number right that it was a net $56,000,000 gain that's sitting in the financial income? Or is there anything else in the overall net finance cost that we need to exclude? So that's the first question. And the second question is on the Malaysian business. I wanted to understand the margins in this quarter were a bit lower than the run rate that we've seen in the previous quarters. If it's only like in other markets, the more urgent and elective cases that are I mean, more urgent cases that are coming in, can you help us understand why the margins are lower? And also if you can just talk about what is the involvement of IH hospitals in Malaysia compared to your involvement in Singapore, which is pretty high or India, what's the involvement in Malaysia at the moment? Yes. Thanks. So let me just take the FX question or the one off question. Yes, EUR 56,000,000 is the net effect from cross currency swaps on the Turkish lira. A couple of transactions inside some gains, some losses, but the net effect is plus EUR56 1,000,000 and that's the only one off. So in terms of the operations, I think there was a question around Malaysia's performance. So Malaysia overall, the biggest loss impact is actually from inpatient admissions. So inpatient admissions has clearly not recovered to where it was before on the domestic front. Foreign travel is affected. Foreign travel also has higher revenue intensity. There's a fair bit of other work in there right now. For example, some of it is COVID related COVID testing. So I guess it's fair to say that most of the countries, but Malaysia gets the effect of that loss of domestic and loss of foreign travel domestic because of the MCO situation in Q1 2021. And there isn't that much else that it can take on by COVID services, right? It can do some tests, but there's relatively few COVID patients being treated in the hospital. So the result is that occupancy is low. So the COVID test, let's say, there's some dilution in terms of margin, because it's largely a soft dynamic effort. And of course, as we cross from 1 year to the other, there are some inflationary pressures on sub COGS, right, on the back of this relatively low inpatient volumes. So what are we doing in Malaysia? I guess when you ask this involvement, I guess you mean to say in helping in this pandemic. So the situation in Malaysia clearly has escalated. As we speak now has gone up to about 8,000 cases a day. So we are responding, we are helping. We have now set aside up to 250 of all of this up to the potential 250 base to 3 COVID patients. ICUs, we have committed up to 44 ICU base within that 250. And of course, we are, as I mentioned, certainly continuing to help with testing and now helping to roll out their vaccination drives as well. Does that answer the question? Yes. Just one clarification. I mean, I'm just trying to understand the difference in the experience in, let's say, Singapore versus Malaysia, where the involvement in Singapore has been enough to offset the missing foreign medical patients, whereas now with COVID being a real problem in Malaysia as well, somehow that's not getting reflected in the commentary that your involvement in treating COVID patients or testing COVID patients can actually offset some of that lost revenue. So if you could just explain that a little bit and you also made a comment that the COVID tests are more dilutive to margins. So is that also a difference versus Singapore? If you can just help us understand the difference between the two experiences that would be useful. So my comments around the ramp up in terms of offering and setting base aside is the capacity that we have set aside as of May. In fact, it was only on May 24. Here, we are reporting the results of Q1 2021. And up to then, while there was this movement control order already in Malaysia. But the truth is that we had very few COVID in patients, right, at that time during Q1 2021. It's very unlikely in Turkey and in India where the COVID volumes were going up, the hospitals were taking that. And we also saw actually fairly strong recovery in the non COVID volumes, but neither happened in Malaysia in Q1, 2021. In Singapore, since you have the contrast in Singapore, there are many other COVID related services, border testing, lots of left tabs, even setting up vaccination centers. Great. And can I just clarify that in Malaysia, the payment is self pay for COVID patients walking in and the government is not involved in subsidizing or paying for it? That's correct. Okay, got it. All right. Thank you very much. Your next question comes from Swati Chopra from Bank of America Merrill Lynch. Please ask your question. Hi, good evening. Thanks for the opportunity. Can I know how much of the revenue or EBITDA in Singapore was from COVID testing and how much is the JSS support, if any? Sure. Thanks, Swati. So in Singapore, the contribution by the revenue of COVID services in Q1 was 6%. 6% of Singapore revenue? That's right. There was a government grant in Singapore during Q1. I think that was for ringgit, a much lesser than it was in previous year previous quarter. Yes. I think just a follow-up question from the previous question like, can you help us understand how Singapore operations did so well despite the fact that it had the highest medical to risk component. I think it was around 25% before COVID. So assuming most of it is not there anymore, how did Singapore manage to grow earnings so significantly? So a couple of points. The first is that this Q1 included March this year, so March last year and there was already some tailing off in March last year. Secondly, the domestic as I alluded to, the domestic side has largely recovered. In fact, I'd say that it's probably fully recovered regards to inpatient volume. And finally, there's a full speed of COVID-nineteen services that Singapore is doing that it did before. So all this has more in compensators for the loss of foreign medical health. And even that hasn't been totally lost. I think there's still a couple of percentage from medical travel because even though as a general rule, patients can't travel in, but there have been exceptions being made for Singapore. But I think I would add on top of this cost saving measures or well a result of an inability to hire more nurses in some areas where they would be required has like the added another couple of points to EBITDA margin. So I think it's really a mixture of different elements. And look, Singapore is a city state and Malaysia is a fairly large country with many diverse effects. I think it's not entirely comparable. Okay. Thanks. That's very helpful. Your next question comes from Rachel Tan from DBS. Please ask your question. Hello. Hi. Thank you so much for the call today. My first question is for Malaysia. What kind of margins are you expecting from the COVID-nineteen patients treatment? And would you be worried or concerned about collection? So the general answer to that is no. I mean depending on condition, of course, it ranges, but we basically are charging as according to on a service basis, right, the same that we'll charge any other for any other condition in Malaysia. So I would say that the margins will be similar to basically other treatments that we offer in our office. Austin. Okay. Thank you. And the last question is from us. You referred to collection and AR risk. Look, I guess, there are, of course, increased risks once you take patients from government hospitals, once you help patients in need. Of course, there are risks we have not experienced a material increase in fallout, and the team is managing this extremely well. Okay, got it. Just a follow-up question from the previous analyst. I think she asked for COVID-nineteen related services for Malaysia. I think that wasn't answered yet. Would you be able to give us a percentage? Are you referring sorry, Rachel, you're referring to the COVID-nineteen revenue contribution, is it? Yes. Okay. In terms of the Malaysia, the contribution is about coming about 10% of revenue. Okay. Got it. And then if I can clarify, I think earlier, just now, Doctor. Lo was saying 6% for Singapore, but that's only COVID testing, yes? It's not because you see, we when we what you're asking now is COVID-nineteen related services, which comprises of, like I said, a few different initiatives that we undertake. So for example, in Singapore, right, we said 6% is specifically for COVID-nineteen testing. But if you're looking at COVID-nineteen related services, which includes border screening, on arrival test, vaccination projects, that's about nearly 17% of our Singapore revenue. So I just wanted to clarify that. Okay. To clarify, Singapore was 16.8%, Malaysia was about 10%. Yes, correct. Okay. That makes a lot of sense because I remember last quarter was about 11%, right? Is that only COVID-nineteen services or COVID-nineteen related services? It's COVID-nineteen related services. Okay. Got it. Yes. And my second question will be on Glen Eagle Hong Kong. I do note that there was some increase in the EBITDA losses in this quarter. But I remember last quarter you said that you are expecting to breakeven in this year. Is that still on track? And given how the losses haven't seen to be, no worries, there's no grants from the government this year, how do you expect Ganygold's Hong Kong to breakeven? So Vanneegels Hong Kong has been growing progressively. In fact, I mentioned before that through the whole year of COVID in 2020, basically didn't see any drop in patient volumes instead of progressive growth. That's continuing. We have also done a bit of productivity improvement, controlled staffing costs. There's no increases in staff costs even as we ramp up at the hospital. So all that is helping out at the earnings line. You recognize that Glengard Hong Kong because by way of the way there is a service fee and there are many obligations upon which the hospital that we open in effect opened as a much opened immediately as a larger hospital than we normally do simply because of commitments that we have made for this project. But happy to inform that as time passed now, slightly 3 plus years to 4. And the volume is now coming to a point that we are quite confident that we'll get to EBITDA breakeven soon. Okay. Are you expecting breakeven either in the middle of the year or probably end of this year? We have said that we are quite confident it will happen within this year. My aspiration is that it will be earlier within this year than later. Okay. We'll see. All right. Look forward to the very end. Okay. Thank you, Raj. I'll go back to the queue then. Thanks. Thanks, Rachel. Your next question comes from Stephanie Chia from CLSA. Please ask your question. Hi, everyone. Can you hear me? Yes, we can, Stephanie. Go ahead. Hi. Yes. Yes, thanks very much for the call. If I could just follow-up on some of the preceding from the questions before this, can I get your percentage of COVID related services for India and Archivada as well? That's my first question. In India, it's about 16% for Q1. Yes. And I think Q1 because well, I guess, the next quarter will be certainly different. Yes, okay. Turkey and Europe, so the whole Achibadam Group, COVID related services in total was 8%. 8%. Okay. Just my second question is on your percentage of revenue from patients in Achibayo, given I think previous quarter it was quite strong. So I want to see if that has held up? It has. It has. So I think running at Is it at pre COVID level? It is. It's like 16% actually in Q1 2021. You're talking about foreign patients going into 1st year, right? Yes, 16%. 16%, is that right? That's correct. Okay. And my last question is on Singapore. I just want to understand in terms of the recent movement restrictions, so is it fair to assume some of the strength will taper up whereby your large domestic volume seen now you will see some impact in the Q2 and perhaps Q3 as well? Yes, there are some short term headwinds definitely every country when it goes into an escalated lockdown, there's some tempering of the elective cases. But I dare say that as we every successive wave and we see that pattern in every country, the impact is less than the last one. And the recovery tends to come faster as well. So we are hopeful, fingers crossed, I think our Prime Minister just spoke on TV and looks like the restrictions should be listed in about 2 weeks. Okay. Sorry, just one more At the same token, it is clearly said that many of these tests, lab tests, on the spot tests will continue for a much more prolonged period of time and that the country needs to prepare itself that COVID cases exist. And I think out of this will develop new revenue streams and new business activities. Got it. Okay. Thank you. Sorry, can I just get one final question? In terms of your big capacity set for COVID patients in Malaysia for 1 Q1? Because I think the 250 bps that you mentioned earlier was as of May. Can I know what it was in the Q1? Look, we have set aside about 200 bps. But frankly, while we set that aside, the number of patients that we actually took in was relatively low. Was relatively low, do you think? Yes, correct. Okay. Okay. That's all for me. Thank you. Thanks, Stephanie. Your next question comes from Amanda Fu from Credit Suisse. Please ask your question. Hi, good evening and thanks for the call. Maybe I could ask a question on Malaysia a little bit more. I noticed that your revenue intensity had jumped quite significantly by about 38% year on year. Do you think you could share a little behind the reason behind the speed jump for Malaysia, please? Thanks, Amanda. Yes. So you can see that amongst the countries that we operate in, you look at the bed occupancy, it's the one that has been has had a relatively muted recovery. In fact, it's not quite recovered anywhere close to pre COVID. You can see the yellow chart there. Now what that means is that the part that's gone away is, a, the medical travel, which has sorry, the part that's gone away is that it's the not so sick patients, right? So the 43% less are the patients who are really the most acute and cannot defer the elective or do not find that it's reached a point that you don't want to defer anymore, which means to say that these patients are sicker and all likelihood need more complex procedures. So because of that, the revenue intensity is much higher. And just to clarify, this number does not include the severe COVID cases yet, right? Because as you mentioned in the Q1, your COVID bid occupancy was quite low, and I would have expected to pick up in the last 1 to 2 months? Am I right to say that? Yes. You're right. So that effect, you can go as far as say that your increase in revenue and that has nothing to do with taking COVID patient. It's due for the reason that I said. Okay. And if I can follow-up a little bit more on Malaysia. I read that Tampere Keong and Klang has been designated as the vaccination centers. And so could you share a little bit how would this impact the operations in Malaysia? And do we know what the charges are like yet for maybe private vaccination services? So firstly, the vaccination program that we have already undertaken, we're helping out with our role to help fight this pandemic. We're happy to do so that the patients are not charged for it. So we are basically contributing in terms of just organizing and empower resources. In terms of that new initiative which allows for a commercial offer of the vaccine That's not been formalized yet, so that hasn't quite hasn't started. I see. When potentially could we expect this to start? We don't know. I think we have to abide by the guidelines that's set by the MOH. So I think what Doctor. Lou mentioned, actually as of now, there's no charge to be imposed on the patient under the national COVID-nineteen immunization program since the vaccine are all provided by MOH. Okay. I understand. Thank you. And my next question would be on cost optimization, right? I was looking at your 2021 strategy across each market and one common theme would be your cost control. So can you give us a little bit color as to how much cost savings have we achieved as a group? And then is there a target that we can look at for the year? Not sure that there's a specific target. The direction is quite dynamic. I would say that by and large the extent of overhead cost savings that we can do, I think it's largely been done. In fact, we are now facing a situation where as volumes come back up in many countries, for example, in India, in Turkey, in fact, in some extent, in Singapore, we're starting to see, as Yolng had mentioned, relative shortages and we will expect ourselves to increase the staffing counts. But of course, in terms of the group wide synergy type initiatives that we have committed to continue, for example, procurement, we have publicly announced that we have a group by procurement savings target for ringgit 1,000,000 this year. And in Q1, we did about 20,000,000 savings there. I mean, if you look at our P and L structure, you see that there are roughly 4 percentage points in functional cost reduction. If you look at Q1 2020 to Q1 2021, Part of this 4% comes from India. There has been a large overhead cost reduction program in place. Part of it comes from Hong Kong. There has been a substantial amount of money taken out of the cost structure. Part of it comes from things like here in Singapore, we can't hire nurses and more like an involuntary cost reduction. And part of it comes from this procurement program. So I think if you look at those 4 percentage points increase in EBIT that comes from cost reductions. I think we are now at a stage where it's not about further cost reductions, but where it's about how much of this can we retain. And if you look at a country like India, look, this is the absolutely wrong time to talk about cost reduction. It's about how do we take care of people, our own people, our patients and not about cost reduction. It's the last topic we discussed with management there. Same like in Malaysia, if you have a movement for all orders, if you have a lot of very difficult situations for the population, it's really not the right time to talk about cost cuts or cost reductions. I think we have achieved a lot, 4 percentage points compared to a year ago. Now it's about how much of this can we retain. And of course, we have a $25,000,000 procurement target that we've communicated. We've achieved some part of it and we'll work harder to get to the $25,000,000 and we invite every supplier also those who feel very strong right now, but we invite every supplier to contribute to this and it goes into affordable health care as well as managing our fees to patients. Thank you. Just to clarify, the target is ringgit 100,000,000 ringgit, right, which is $25,000,000 Yes, sorry, ringgit, yes, Yes, that's it. Okay. And sorry, just let me squeeze one last question. I just wanted to make sure that I caught Doctor. Calvin Lu earlier. You mentioned that the number of tests that Park Wei lab in Singapore processed in May alone was about 1,000,000, Am I right, just for that month? Sorry, yes, up to May. Yes, up to May. It's a cumulative number. So since we started doing the number of tests until this year in May, then we have popped in 1,000,000. That's correct. I can't hear. Sorry, say that wrong. Because as you can see on Slide 24 now, we are as of April, we were close to RMB900,000. So in May itself, we have crossed that RMB1 1,000,000 mark. Okay. RMB2 1,000,000 mark. What Joak mentioned earlier, I think as to what our PM has just mentioned, I think there'll be more testing to be done? I mean, let's look at our lab business overall, and I'm sure going forward, we will disclose more and more about our diagnostics and lab activities. But if you just look year over year, and that doesn't include India, look, we've increased our business by 60%, 70% year over year. That's quite amazing. We've doubled our business in Singapore, for example, if you just look year over year. So quite substantial improvements in and contribution from the laboratory business. And at this stage, it doesn't appear as if this will go away. Thank you. And this increase is volume or revenue? That's revenue. 50% to 70%. That's revenue. Okay. Thank you very much for taking all my questions. This is all for me. Thanks. Thanks, everybody. Thank you. Your next question comes from Nicole Guo from UBS. Please ask your question. Hi, good evening everyone. Congratulations on your results. I just had one follow-up question on North Asia. I noticed that your North Asia EBITDA on a Q on Q basis actually increased quite substantially. So from minus 6% sorry, minus RMB6 1,000,000 in Q4 of 2020 to a minus RMB36 1,000,000 in this quarter. Is that all attributed to Hong Kong? Or does it also include some of your businesses in China? So Greater China is or North Asia, as you said, is both of it. It's China and Hong Kong together. I'm sorry, and the number you're referring to was the Revenue growth. The North Asia EBITDA, not the North Asia EBITDA, just North Asia. You said the $36,200,000 is it? That's the Yes. And then versus $6,000,000 last quarter, Q4 2020. Yes. Yes. Okay. So the difference, a lot of it can be attributed to, firstly, in Hong Kong, we are still getting government grants in Q4. So there were no more government grants once we crossed the year. Secondly, also, there is a significant variability in terms of when you look at Q4, the seasonality from Q4 to Q1 because Greater China, both China and Hong Kong has a significant Chinese New Year effect. Right. Okay. That's a typical type cycle. Okay. But it's not two reasons. Operationally, it hasn't really the numbers don't I wouldn't say that the numbers does not point to that significant operating change. It's for these two reasons I mentioned. I see. Okay. So Chengdu will be under Greater China New, right? That's correct, yes. Okay. And now maybe you could just give us a quick update on Shanghai, when do you plan to open that hospital? That's probably likely sometime 2022. Okay. All right. Okay. Thank you. Thanks, Nicole. Your next question comes from Yok Chia from JPMorgan. Please ask your question. Hi. Thank you so much for the call. I have two questions. One is how would the removal of litigation overhang change your focus on India? And second would be, is your Serbia acquisition a deviation from the overall strategy? And what's the threshold to make an announcement on the exchange? Thanks. Your first question is that the litigation on India, right? If you're removal of the overhang, how would that change our focus on India? Is that what you're asking? Yes. Sure. So overall, our direction hasn't changed. India is now one of our own markets. It's a very strong growth market and that's why we got in there. As you know, we made that transformative acquisition by Aftis. So the plan always has been to grow. We already have done that through all the operating means as you can see from our progressive improvement in Fortis results since acquisition. Of course, what there has been some restriction with regards growth beyond the operating means in terms of potential acquisition base by which we can further improve its capital structure. So once and maybe we are hopeful and positive that we have favorable outcome and we have faith in the Indian judicial system. So once that is the case, then I guess that opens up avenues for expansion that is beyond just the operating means of growth. Okay. Sure. Does that help? And then what's the second question? We missed that. Can you repeat your second question? Yes. On your Sobeo acquisition, is that a deviation from your overall strategy? And what's the threshold to make an announcement to the exchange? So no, it's not a deviation from our strategy. In this case, it was a relatively small hospital, so it doesn't hit that materiality threshold. But it's not a deviation. In fact, you can see that one of our strategies was to grow the European beachhead that we had for Achibadam. We are quite pleased that the European operations have been growing strongly. The revenues are in euro hedged type denominations. And in fact, while I mentioned that 16% of revenues to Turkey, which is in hard currency, that's in Turkey. But if I combine that with the European operations, they now take this euro denominated to Achibada, I mean, euro or U. S. Denomination. That's now working out to about 38% because in large part, because of the growth of the European operation. So the addition of Serbia to that cluster is just part of that. It's immediately accretive acquisition. It's one of the best brands there. It has strong earnings. Okay, sure. Yes, that's very helpful. And what's the threshold to make an announcement to the exchange for any type of the acquisition? No, I think the so I think there are 2 things, right? There's a mandatory announcement threshold that is was 5% of net assets. But of course, we are free to announce anything we'd like to announce because it fits into our market communication. I think this announcement on Serbia, so you should not misconstrue the announcement with an acquisition price. I don't think you should take that calculation. We've announced this because we feel it fits right into the expansion strategy for Turkey and Europe. It's a news in Europe. It's a growth market, as Kelvin has rightly shared. And it is earnings accretive. So this is a great sign on how we recycle capital from assets that are not poor, like a minority stake in an Apollo managed hospital in India into something that we will be managing going forward. And you will see similar types of announcements in Turkey, in Europe, in India, in other markets where there is a suitable candidate that fits our cluster strategy going forward. And this leads me back a little bit on the Indian overhang. Look, the overhang on the one hand will be lifted and there will be a new reinvigorated growth strategy for India. But very immediate steps out of this resolution of the Supreme Court topic, some certain corporate restructuring steps inside Fortis that will immediately save tax expenses, things that we could not execute due to the stay order. And we believe there will be in the 1st 6 to 9 months very massive steps to improve underlying operational performance. So this gives us an opportunity to take this asset into the growth path and earnings growth path that it deserves. Your next question comes from Shazan Si from CIMB. Please ask your question. Hi, good evening. Can you all hear me? Yes, Susanne. Hi, good evening. Good evening. Congrats on a good set of numbers. Few of my questions were actually answered. But if I could just recap on the Malaysia side, and I contrast it to the India segment with regards to the COVID-nineteen. The numbers for Malaysia do seem a bit more a lot more lower than the India side. But going into the Q2, as mentioned, it could be a bit more a lot more higher. So would you say that, Malaysia could come towards the sort of number that India act right now? And how should we also look at India numbers going forward given the 2 countries are actually the 2 geographical segments are actually in quite bad shape going to the Q2? Thanks, Susanna. Good question. The dynamics in the countries are quite different. So in India, through the whole pandemic, what we have seen is that the there's been a continued and strong recovery of non COVID patients. In fact, up to Q1, it's I dare say that's almost largely recovered. But that was not the case in Malaysia, right? So there was this lockdown not lockdown, but MCO type situation that's significant, I guess, anxiety still in terms of the elective patients coming back and that's why you can see the relative occupancy in Malaysia is low. That's one factor. The second factor is that in India, the number of COVID cases really are significantly larger at any one time, never mind the current huge surge and crisis. But at any one time, the numbers are really much larger. And the number of patients, COVID patients, particularly in the hospitals, significantly larger than in Malaysia at any time. And so that's just the way things are. Then you ask me going forward then what's likely to happen. In India, I think it's quite fair to say that in Q2, we'll see a significant surge in the number of COVID patients going in. But because the impact is so great, it is likely that we'll have ring fenced set aside base for that and therefore the elective cases are likely to be affected and they will drop. Because the effect is so great, right? You can't just do it both going up at the same time. In Malaysia, don't know, cannot predict for sure, but I would be surprised if the number of COVID emissions becomes that large. Hopefully, they remain really under control. It will be more than Q1, but certainly won't be the kind of magnitude that you see in India. Got it. And just on the sense of capacities to cater towards COVID-nineteen for both these geographies, could you provide some color on that? It does seem like because what I understand is in India, there's a lack of capacity per se, just say generally, right? But in Malaysia, so on the ground, I understand that's also the case. Is that because that's a number of allocated bids you have or it's something that will grow if you move that more than what you have now? How would that change that allocated debt space in a sense of Malaysia? Well, I mean even in Q1 that which we allocated was not as many quite as I mentioned already was much fewer than that. As currently, of course, the number has gone up. I don't know if you'll come anywhere close to the increased capacity we have provided for it. Okay, okay. So, we'll see. Got it. And my other question will be looking at the testing right now, as we know, Singapore is sort of has been pushing the number for testing. If I look in terms of capacity wise, would you say that you need to grow all the regions simultaneously or is there specific regions that you think for testing capacity only is the ones that you may focus on going forward? Okay. Let me try to understand that. You're saying that do we have to grow testing capacity in all the countries at the same time? Yes. No, we are growing according to the need, of course. It just has to be at the same time, at the same pace. Is that what you meant? Yes. And maybe which one would be your priority, I guess, looking at the sort of demand for testing? I mean, as of now, you can see by sheer numbers, India is far where they can all the other countries even in Q1, we'll not be surprised in Q2, we will that trend will only accelerate. It's a function of the size of the country and also the size of the spike in that country, right? Okay. Okay. But right now, we are not close to any of the it's not would you say that none of the countries, maybe barring India, is close to something that you have to seriously think of increasing capacity? We have been increasing capacity. We have been, we certainly have been. It doesn't take that much. It's not like building hospital base, right? You really you may need to add more machines to run. But we certainly have been as the need arises. Okay. Then I guess the question on CapEx for all these is not that expensive. Yes. Overall, it's contributes positive. Okay. Thank you very much. That's all from me. Thanks very much. Thanks, Susan. We probably take one more. In due of the time, I think we will take one more last question. Your last question comes from Geoff Ng from JPMorgan. Please ask your question. Hi. Thanks all for taking the question. On India, we saw some development on the Supreme Court recently or maybe just today. Going into a little bit of technicality because the takeover price was $1.70 in the past, share price has gone up, you have used 60 days historical. Not sure how we should read into the situation, whether you guys have to hike the offer price and is this still I mean the GEO is still the same partial takeover and not a full takeover? Yes. Look, very, very choppy situation, I think, we have here. If you look at liquidity and if you look at the dynamics of the Fortis share price, there is clearly speculation. And I guess the question will be to what degree do we want to participate in that level of speculation. If you look at the underlying performance of the business, we think we it's very hard to see how share price has increased in the last 6 months as it did. Now we have an MTO outstanding for 170 and we really have to think to what degree do we want to participate in speculation and speculative price developments or where do we actually see the underlying value of the asset. And I guess, in the range of $200,000,000 we felt there was something that was closer to where we believe an underlying value is. The value where we are trading now, we need to think about how much has been overtaken by speculative investors. So I think we have no clear view yet as to whether we stick with the SEK 170,000,000 or whether we want to increase that. I think this will be a discussion much closer to the time. But what we can say is that where value is right now, we see there's quite a bit of speculation in the market. Sorry, allow me just to I'm not sure this clearly answers your question, but No, I can see the predicament and I hear where you're coming from. The Indian market has definitely got a lot excited over the potential overhang removal as the Supreme Court does rule in your favor. But of course, you're also bound by the exchange rules, right, which I don't know whether the occupied have to be really based on the last 60 days or the last 170. So you know what, it doesn't really matter. But the question is this, right? You guys own 30% and it's been such a hassle in the past. I see that you guys have sufficient board seat, but is it sufficient with 31% in the current board seat to really direct Fortis to where you want it to be? Or you think eventually you still want to own 51% to effectively have control? Look, I think eventually, we'd like to own more than what we own now. That's why we put the tender offer out in the 1st place. I think there was an intention and there is an intention to get closer to 50%. I think that's clear. But look, everything needs to have a financial logic to it as well. And if people are speculating on the back of us potentially increasing here the tender offer price, we really don't want to participate in such rumors and such rumor driven value increase. We believe in businesses that have a substantial earnings improvement. And if there has been, then sure, we should then reflect this appropriately in a tender price. But at this stage, I think there has a little bit has been a little bit of a disconnect between share price increase and underlying performance development. Thanks so much. Allow me to have the final question. So shifting back from Fortis' board to your own board, of course, the recent news took us by surprise of the M and A announcement. But just taking a step back, how is the bot dynamics like? I mean, this thing could have been taken care of. Why are such things being watched in the public? I mean, literally I'm not sure what M and A announcements are you referring to and what speculations there are, but there aren't any major M and A announcements that we Sorry, not announcement, but the new report from Bloomberg, right? We spoke about mid-three and the private equity. No, we have heard that speculation as well, and that's not something we are able to comment on. No problem. I'll leave that right. Thanks. Look, it's great that shareholders see there's value in the company. That's great. No, I totally agree. There's definitely value whenever private equity want to take you guys private, right? I thought this could have been better communicated within the Board of IHH rather than through a news case. Thanks. Thanks, Jeff. I know we have some additional questions from the webcast participants. But in view of time, I think please allow IR to take it separately with you instead, all right? Thank you for your understanding. So we'll now conclude the IHH Healthcare Q1 2021 financial results briefing. Thank you for joining us today. And if you have any other questions, please contact IR via email at irihhhealthcare.com. With that, we can conclude the call. Operator, please? Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.