ad astra per alia porci

Business Times – 30/07/07
July 30, 2007, 1:58 am
Filed under: current affairs

Business Times – 30/07/07

Chinese healthcare industry

  • Despite the inevitable challenges, medical services providers like Parkway Holdings, China Healthcare and Pacific Healthcare Holdings have stepped up their presence in China over the past 18 months. They have either bought up majority stakes in local healthcare firms or set up joint ventures there.

  • The size of China’s healthcare pie is large and growing, says Ronil Sujan, regional head of Rabobank’s life sciences team.

  • ‘It is a fast-growing market with rapidly rising disposable income and an ageing population,’ he told BT. ‘Public healthcare expenditure grew from US$41 billion in 1997 to US$96.9 billion in 2004. It now represents 5.55 per cent of China’s GDP and is expected to rise further as healthcare expenditure is expected to outpace economic growth.’

  • According to Frost & Sullivan, China has one of the largest patient pools in cardiovascular diseases, diabetes and oncology. Besides that, healthcare management and healthcare information technology management are also fast moving segments.

  • Singapore’s healthcare players seem to prefer partnerships to going it alone. Parkway, for instance, bought a 60 per cent stake in World Link Group back in May for US$42 million. The latter runs four ‘expatriate-focused’ medical facilities in Shanghai and is seen as complementary to Parkway’s newly-opened Shanghai Gleneagles Medical and Surgical Centre – a 32,000 sq ft site in which it has a 70 per cent interest.

  • Similarly, Pacific Healthcare is taking up a 70 per cent interest in Kanglian Hospital in Shanghai and recently bought a majority stake in a chain of cosmetic and wellness centres in Guangzhou. On the other hand, China Healthcare, formerly known as Econ Healthcare, owns a 20 per cent stake in a Chinese firm that makes hospital equipment in Zhuhai and, last year, signed a pact to invest up to $20 million in a joint venture with a hospital, nursing home and medical school under its assets.

  • Unfamiliarity with the local environment and an evolving healthcare policy are among the factors preventing Singaporean players from making bolder moves. Payment issues also come into play. Frost & Sullivan estimates that only 5 per cent of the private hospitals in China are allowed reimbursement on medical fees of patients by the state-run medical insurance programme – a factor that hinders the growth of private hospitals in China.

  • CLSA analyst Zhuo Zhengjie, too, is of the view that it is not an easy market to penetrate. Many locals still turn to traditional Chinese medicine for treatment or tend to stay on for weeks at hospitals for full recuperation – a habit that may drag down the profitability of the service provider since ‘most of the revenue-generating activities, such as their tests, scans and so on, come in during the first couple of days’, he said.

  • Thomson Medical Centre, for one, is not too eager to jump on the bandwagon. Chief executive Allan Yeo was once quoted in this paper as saying: ‘China, as we know, is a market with good potential but at the same time we feel we do not understand it well enough.’

  • But the sheer size of the market makes it hard to ignore. Raffles Medical Group is aiming to announce ‘something on our China activities in the next year’. And even other services firms want a slice of the China pie. Keppel Facilities Management and Operations last year announced that it will head a consortium to provide healthcare and hospital management expertise to Shandong’s Linyi People’s Hospital, while Singapore Computer Systems has reportedly said it is targeting the China healthcare IT solutions market.

  • Said Frost & Sullivan’s Ms Das: ‘There were around 1,477 private hospitals in China by the end of 2005 which is less than 10 per cent of the total number of hospitals in China. Hence, there is a lot of potential for companies to invest and grow.’

Dubai – a lifestyle hub

  • FORGET China. Dubai is the place to be for lifestyle companies looking to expand their businesses beyond our sunny shores and the region.
  • Apart from the usual companies hailing from property and finance industries, Dubai’s similarity to Singapore has made it verdant ground for local entrepreneurs specialising in food, fashion and even spa businesses.
  • Eager to spread their wings, many are making their way there in the hope of turning the local brands they have painstakingly cultivated, into international names.
  • One of the main draws is the city’s position as a tax haven, populated by people with extravagant spending habits.
  • With Dubai’s plans to become the Middle East’s leisure and entertainment hub – the US$5 billion theme park Dubailand being just one project – it seems like a no-brainer choice for those who have already exhausted expansion options in Singapore.
  • One such brand that identified Dubai way back in 2004 as an ‘it’ place is shoe label Charles & Keith – one of the first companies in Singapore to go, well, East. Charles & Keith now has a total of 11 franchise concept stores in Dubai alone and 42 in the Middle East region – not bad for a homegrown shoe label only about 11 years old.
  • Hot on the heels of Charles & Keith was RAOUL, the in-house brand created by local fashion retailer FJ Benjamin. A franchise deal with Dubai’s leading retailer Apparel LLC, the first RAOUL store was opened in Dubai’s Mall of Emirates two years ago, followed shortly by a second one in Dubai Festival City. Outside South-east Asia, Dubai was RAOUL’s first foray into the international market and has managed to successfully achieve very high double-digit growth over the last year. Both stores sell only menswear at the moment.
  • “Singapore is a very good market but it’s just one country and when you’re a brand owner, you need to look at expanding to other countries, for sure,’ explains FJ Benjamin’s CEO Douglas Benjamin. ‘I think Dubai is really a very unique place in the world. It’s quite phenomenal what has been done there in the last seven or eight years. All companies have to look seriously at Dubai, not just for the Dubai market but as a launch pad for the Middle East. ‘A lot of people from other Arab countries go to Dubai to shop. Just like how Singapore is a gateway to South-east Asia and Hong Kong is a gateway to China, we see Dubai as a gateway to the Middle East.’
  • According to industry players, Dubai trumps China as an option for expansion largely due to similarities between Dubai and Singapore. Both are cosmopolitan cities and both have buzzing expatriate scenes with an international flavour.
  • And surprisingly, both countries even have similar shopping habits although it cannot be disputed that more money is spent in Dubai than in Singapore. Reveals Mr Benjamin: ‘You know what’s interesting? We’ve noticed that best-sellers in Singapore are also best-sellers in Dubai. Like Singapore, the most expensive, more exclusive and unusual products sell at a faster rate.
  • ‘Both markets are exposed to fashion trends. Men are aware of quality and what’s nice. They are no longer just looking for the cheapest shirt available. This is a trend that has evolved in both countries. Where men used to come in and ask for the cheapest range available, now they ask for the most expensive range.’
  • Says IndoChine’s founder Michael Ma: ‘We’ve identified Dubai as a potential location for the longest time; it is one area that we can’t ignore. It is an economy that is growing very fast and one that is business- and investor-friendly.’
  • ‘It’s like Singapore; there’s really nothing much else for people to do there save for corporate business, partying and dining.’ Agrees Mrs Vacha: ‘People literally live in shopping malls in Dubai. It’s sand everywhere. Even if you had a garden, it would be filled with sand. Dubai is very climate-driven; it can get remarkably hot there.’
  • Which is why, she says, Dubai is always looking for interesting concepts to add to the shopping mall-laden city – it has the highest shopping mall in the world – and why The Landmark Group decided to franchise three concepts from the Spa Esprit Group: Strip (Brazilian waxing concept), Browhaus (eyebrow grooming concept), and Qi Mantra (remedial massage concept).

Luxury watch market set to boom in Asia

  • TWO mainboard-listed luxury watch retailers have caught the attention of UOB-Kay Hian, which has initiated coverage with a ‘buy’ rating on The Hour Glass and a ‘hold’ on Sincere Watch.

  • Asia is the biggest and fastest-growing market for luxury watches, accounting for 43 per cent of Swiss watch exports in 2006, says the broking firm. And both companies are likely to ride this boom.

  • Asia’s strong economies and growing affluence bode well for demand, it says. And rising tourist spending in Singapore is expected to benefit watch retailers.

  • ‘The outlook for the sector remains very promising and the two niche market players are well positioned to benefit from the positive industry trend,’ according to a UOB-Kay Hian report.

  • The Hour Glass sells 65 brands through 23 shops in seven countries and regions. It is very focused on its existing markets, said UOB-Kay Hian. The broking firm likes The Hour Glass’s impressive organic growth and merchandising strategies, evidenced by a high inventory turnover of 2.5 times. The stock is trading close to UOB-Kay Hian’s revalued net tangible asset (NTA) of $1.54, and the company’s investment properties could add nine cents to NTA per share if marked to market. Including an 11-cent dividend, the stock is trading at a price-earnings ratio of nine times for FY2008, says UOB-Kay Hian, which expects earnings per share (EPS) to grow at 10 per cent compounded annual rate from this year to 2010 on 9 per cent compounded growth in revenue. UOB-Kay Hian’s target price for The Hour Glass is $1.96. The counter closed four cents down at $1.67 on Friday.

  • Unlike The Hour Glass and other local players, Sincere Watch sells and distributes luxury watches. It commands higher gross margins than pure retailers like The Hour Glass and Cortina because of its exclusive distribution agreements, says UOB-Kay Hian. UOB-Kay Hian expects 10.4 per cent compounded growth in revenue over the next three years and 10.2 per cent compounded growth in EPS from this year to 2010. It has a ‘hold’ rating on the stock mainly on a valuation basis given a recent price surge, with an entry price of $1.53 and fair price of $1.70.


Leave a Comment so far
Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: