Cover Story: ‘If you don’t have heart-ware, you won’t be able to succeed’

This article first appeared in The Edge Malaysia Weekly, on April 8, 2019 - April 14, 2019.

The Edge

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IHH Healthcare Bhd managing director and CEO Dr Tan See Leng is not an easy man to reach. His schedule, as the head honcho of the RM50 billion healthcare outfit, is hectic. The Edge finally caught up with the good doctor and had a chat with him on the prospects for the group. An excerpt of the interview follows.


The Edge: Doctor, how has it been? You’ve been here for some time now ...

Dr Tan See Leng: Well, the last 10 years have been quite phenomenal for me and the organisation. We’ve been able to expand our footprint from what was the old Parkway Holdings Ltd. Today, we’re in 11 countries, including Turkey, Singapore, Eastern Europe, Bulgaria, Macedonia, and, of course, we are in India, Hong Kong, China and Brunei.

It has been a very intense, very strenuous climb in the last 10 years.


And growth-wise, are you able to quantify it?

When we first started in 2009, I think we had three hospitals in Singapore and 11 in Malaysia. Later on, Acibadem came along. We opened Novena and went on to bid for Hong Kong. Now, we have Fortis. We now have 84 hospitals. So, from 14 to 84.

But I’m not someone who focuses on just size — the number of beds or hospitals. I’m more comforted by the fact that we’ve been able to replicate our Malaysian and Singapore brand and translate it into many of these geographies.


How competitive is healthcare?

It is an intense competition space that we operate in. I mean, it is a certain kind of need. The reality is that we all aspire to have good health. And the advances in medical technology also mean that as the average life span continues to improve, the number of patients will also continue to grow.


So, one of the barriers to entry would be that you need deep pockets?

It’s not just deep pockets. A barrier to entry is that you need good doctors. You can throw capital, you can throw billions of dollars but if you don’t have that ‘heart-ware’ and that software in terms of making sure that you create an ecosystem that can attract doctors to join, you will not be able to succeed.


We notice that Singapore contributes a lot to the group’s revenue even though it’s small in terms of hospitals and beds ...

We focus on very high-end healthcare there. In terms of the comprehensiveness of our facilities, we are truly a one-stop centre. Meaning that when you go into Parkway East, Mount Elizabeth Novena, Mount Elizabeth Orchard or Gleneagles, you don’t have to go anywhere else.

All the doctors will come to you, the equipment is there and we have well-equipped intensive care units, operating rooms, day surgical facilities and radiological investigation facilities, plus even radiation oncology.

Let’s say a lady wakes up in the morning and finds a lump in her breast. By 9am or 10am, she will be able to get an appointment to see a doctor. On the same afternoon, whatever that needs to be done — ultrasound, mammogram, even fine needle aspiration biopsy — will be done. And on the same day or the next day, she’ll be in the doctor’s office and the doctor will be able to give his diagnosis.


Is that why there is a premium in Singapore?

Yes, that is what we deliver. And we do the same now in Malaysia. The model we started in Singapore is now in Malaysia. We also see that in Hong Kong and Turkey. We are now bringing that to Fortis in India.


After Fortis, does India look exciting? What is your total investment to date?

If we’re able to complete [the purchase of Fortis], we would end up with 56% to 57% of the company, which means a total investment cost of about US$1 billion. Today, we have invested about US$500 million to US$600 million in the 31.17% stake in Fortis.

The remaining US$400 million is in escrow in a bank in India, waiting for the Supreme Court’s decision. We are not that worried about the Supreme Court’s decision going either way.

If they say yes, we can carry on. Then the money will be used for a mandatory general offer, and we will end up with another 26%. And if they say no, it’s also okay. The money will be returned to us.


The bottom line is that you need to increase your stake in Fortis ...

We don’t need to.


But you would like to?

We would like to but we don’t need to. Because today, with a 31.17% stake, we are already the single largest shareholder of Fortis.


You sold out of Apollo Hospitals, and then you got Fortis ...

Apollo was a financial investment. When we got out, we had a 10.85% stake. But we’re no fund manager or investor. We don’t invest. We’re operators. Our structure, the way management has been is that we roll up our sleeves and go in and operate the asset. We identify hidden gems, we take, clean and polish them until they shine so that they become crown jewels. That is what we do.


IHH’s financials are erratic. Is that common in the healthcare sector?

The bulk of it is actually foreign exchange.


You’re hedging in Turkey, right?

We have gone up to 90% (shareholding) now (in Acibadem). And we will be capitalising the US$670 million foreign currency-denominated debt to bring the debt down to about US$400 million.

We have stopped expansionary capital expenditure in Turkey. We’re also trying to look for ways and means to rationalise some of the assets. We hope that in the medium term, we will be able to reduce the debt by another US$100 million to about US$300 over million. Then, it becomes manageable and you will not see fluctuations.

Of the US$300 over million, we plan to take half in Turkish lira, so the only exposure is less than US$200 million of foreign currency. So, these are the steps that we’re actively taking.


Whenever we talk about Singapore, we always look at Hong Kong. It’s about the same. Do you replicate what you’re doing in Singapore there?

We hope to. I think in the long run, Hong Kong, as a market, should be at least on a par with Singapore, if not better. The key thing about Hong Kong is that if the government doesn’t give you land to build a private hospital, you have no chance.


How about China?

China opened up its markets only in the last couple of decades. The healthcare industry always lags behind. When a country opens up, in the beginning, it is logistics, construction, property, then telecommunications and airlines, and then usually the banks. Healthcare comes in much later.

Only in the last 10 years have we seen a proliferation of private healthcare, (but then again) our (offerings) in China are high-end. So, in China it is greenfield development, just like in Hong Kong. And incubation is long in greenfield development.

We’re in Hong Kong, which is part of the Greater Bay area; Shanghai is part of the Yangtze River delta; Chengdu is part of Central China, Sichuan. In Chengdu, we will open in the second half of the year with 450 beds. But we will start with 100 beds. In Shanghai, we will open in the second half of next year, also with 500 beds, which will be phased in. Only in Hong Kong do we have to open (big). So, if you look at these three, we’re on track.


What impact will this have on your bottom line?

Given where we are, our bottom line will not be that impacted because of the earnings from Singapore, Malaysia and Turkey. In India, we’re beginning to see growth now. Very fast, you know, a 100-day plan. We’re already seeing an improvement in Ebitda at Fortis.


Do you see a lot of value in Fortis?

Yes. When you do the maths, it is quite mind-boggling. We have plans, we’ve just crossed the 100-day plan, we’ve fulfilled all of the requirements we said we would. So now, we are entering the six-month plan. The other thing is rationalising some of the assets, for instance, they’ve got some minority JVs in Mauritius, in Sri Lanka, and they have bought some land. We will rationalise some of these things.


When you look back, are there any highs and lows?

It has been mostly highs. You need resilience and mental strength in this business. At times, when people think you shouldn’t be doing something, that’s where the opportunities lie.


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