Singapore-listed healthcare firms stay pat on long-term plans amid pandemic pains

Singapore

AS Singapore's hardy healthcare firms are beset by evaporating medical tourism and waning patient volumes amid border closures and the circuit breaker, most are banking on a diversified portfolio and virtual services to tide them over.

Singapore Medical Group (SMG), for one, is feeling the pinch across segments from oncology to cardiology and diagnostic imaging. Foreign patients from Asean account for 20-30 per cent of its revenues.

"Needless to say, since we closed our borders to regional patients, it has had an effect on our business. They affect different specialities and clinics differently," said SMG chief executive Beng Teck Liang.

That is putting it mildly. This month, SMG slashed its FY2019 dividend by half, citing a need to save cash amid the Covid-19 pandemic.

Catalist-listed firm Asian Healthcare Specialists (AHS), meanwhile, derives most of its revenue from local residents but has also seen foreign patient numbers dwindle. Chief executive Chin Pak Lin said that its foreign patients are mostly from South-east Asia who come to Singapore for elective treatment such as correction of foot deformities, joint replacement surgeries or spinal implants.

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Over at sector giant IHH Healthcare, chief executive and managing director Kelvin Loh recently told The Business Times 90 per cent of its patient volumes comprise local residents in its anchor markets of Singapore and Malaysia. Nevertheless, there is still a short-term impact from the Covid-related restrictions.

As IHH's Singapore business derives some 25 per cent of its revenue from medical tourism, Affin Hwang Capital has slashed its earnings forecast for the group for FY2020 and FY2021 by 4-5 per cent to account for the lower medical tourism and delays in non-urgent procedures.

Healthcare companies are also being hit by lower volumes as patients defer elective treatments during the pandemic. According to Dr Beng, aesthetics and lasik procedures are the hardest hit among SMG's services; although he expects to see some "revenge buying" after the circuit breaker is over.

For this reason, analysts expect SMG's diagnostics and aesthetics (D&A) segment to suffer a blow this year. The D&A unit had driven the group's revenue to a record S$95 million last year, up 11 per cent from a year ago.

According to AHS's Dr Chin, the private sector largely handles elective surgeries. Since most non-essential admissions are discouraged, he said, there is still quite a bit of spare bed capacity in the private healthcare space.

For IHH, at least half of its patients are in the acute and semi-elective categories, said Dr Loh. "The urgent ones, we can't defer. The semi-elective ones can be deferred, typically by one or two months. The elective ones, eventually in the new normal, we still have to get it seen to. So that's how we are seeing our transition - our recovery," said Dr Loh.

To plug the gap, SMG has been pushing its tele-consultation Hidoc platform that was launched last year. "This crisis reinforces and accelerates our strategy that more low-risk specialists' consultations and reviews can and will occur in the virtual space," said Dr Beng.

Hidoc has seen a "dramatic" increase in usage. From less than 20 specialists and "a few" general practitioners (GPs) pre-Covid, there are now some 60 specialists and 20 GPs on the platform. By end-year, SMG expects over 140 doctors to be on the platform. It also has an eye on expanding the platform to neighbouring countries in the coming months.

IHH has already taken advantage of its reach across 80 hospitals in 10 countries to launch a global telemedicine initiative. It has very quickly garnered online patients across the various markets, including India and Turkey.

But while telemedicine has its uses - particularly now, given the importance of social distancing - and is convenient and could even reduce late detections for diseases, Dr Chin warns that there are limitations as the absence of a physical examination of the patient could result in a misdiagnosis.

As these companies deal with the short-term impact on business, they appear to be staying pat on their long-term strategy.

SMG said it is still "very much focused" on its regional expansion, and is looking for new opportunities.

Dr Beng said: "We have successfully established a strong physician presence in Vietnam, Indonesia and Australia. We have been fortunate that these markets are now either starting to open up or are already fully functioning, and revenues have actually been quite stable."

Dr Chin said AHS plans to continue to grow its network of GPs. "AHS will constantly adjust its priorities and resources to enter into other aspects of health care through acquisition. With a diversified profile, the company can emerge stronger from a crisis," he added.

Has the pandemic upended the notion that health care is recession-proof, particularly when it comes to private healthcare stocks, as patients seek the lower-cost alternative of public hospitals to cut back on spending amid an economic slowdown?

IHH's Dr Loh thinks not. "Health care is a need that doesn't go away. In the end, people choose the healthcare provider because they trust it to give excellent clinical outcomes. At the same time, they trust that for any price point they pay, the value comes with it."