This article first appeared in The Edge Malaysia Weekly on October 26, 2020 - November 1, 2020

Sime Darby Bhd and its joint-venture (JV) partner, Australia’s Ramsay Health Care, are still deliberating about whether the market is conducive for the listing of Ramsay Sime Darby Health Care Sdn Bhd (RSDHC), says executive director and group CEO Datuk Jeffri Salim Davidson.

“If you ask me whether we have thought about an IPO (initial public offering), yes, we have, and we are still thinking about whether it is something that we want to do,” he tells The Edge.

He was responding to a Bloomberg report on Oct 20 that said Sime Darby was exploring the possibility of listing its 50:50 JV healthcare unit, RSDHC, which could raise at least RM500 million in 2021.

With the resurgence of Covid-19 infection cases in the country, Jeffri says questions still abound over whether the market is conducive to an IPO of RSDHC.

“Are we big enough to list, should we get bigger before we list and do we have a growth story [to tell potential investors]? These are some questions we need to ask ourselves.”

He adds: “While we have been growing the healthcare business well, we haven’t opened up new hospitals [recently]. Should we do that to create a buzz?

“So, we are still at the thinking stage. There is no definitive decision that we are listing RSDHC.”

RSDHC runs three hospitals in Malaysia and three in Indonesia, as well as a day surgery facility in Hong Kong.

Nevertheless, Sime Darby group chief financial officer Mustamir Mohamad concedes that an IPO would be a positive move for RSDHC, given the premium valuation commanded by hospital asset operators regionally, which would increase its bargaining power in negotiations.

In July last year, Sime Darby and Hong Leong Group were reported to be in the race to acquire hospital chain Columbia Asia. The Hong Leong group, in partnership with private equity firm TPG, eventually won the bid, as — The Edge has learnt — Sime Darby had declined to raise its offer for Columbia Hospital because it did not want to pay more than its internal valuation of these assets.

According to data from the Companies Commission of Malaysia (SSM), RSDHC’s net profit has been growing over the last five financial years to June 30, 2019 (FY2015 to FY2019). The company posted a net profit of RM110.36 million for FY2019, up 3.4% y-o-y from RM106.73 million. At the same time, its revenue rose 8.9% y-o-y to RM938.77 million. It has yet to file its financial statements for FY2020 with SSM.

According to Jeffri, Sime Darby’s share of profits from the RSDHC JV fell 20.4% y-o-y to RM39 million in FY2020, owing mainly to impairment of assets and the impact of the pandemic during the second half of the financial year.

He says: “About half of our patients didn’t come to our hospitals during the Movement Control Order period, as many delayed their elective surgeries and check-ups.

“But we are lucky that we serve a great number of Malaysian patients and our reliance on medical tourism is only 30% compared with hospitals in Penang and Melaka, where it is 60% to 70%,” he says, adding that patient volumes had recovered to pre-Covid levels in September.

“This is a highly resilient sector with bright prospects, and we will continue to seek out opportunities to grow the business, especially since the demographics and growing affluence in Asia support this. We may consider M&As or IPOs, but there has been no decision on this matter. We are only thinking of the possibilities and there is nothing conclusive at the moment.”

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