Clearbridge Health Limited - Tayrona Financial 2020-01-31: High Growth Markets To Bring Tremendous Upside


Clearbridge Health Limited - High Growth Markets To Bring Tremendous Upside

  • CLEARBRIDGE HEALTH LIMITED (SGX:1H3) is an integrated healthcare group with a focus on the delivery of precision medicine with businesses comprising of
    • healthcare systems,
    • medical clinics/centres and
    • strategic investments in medical technology companies.
  • Healthcare systems refer to the provision of a range of clinical diagnostic tests and services that are augmented through third-party collaborations with laboratories and other institutions globally. Services include health screening, cancer diagnostics, biomarker diagnostics and treatment monitoring and prognosis, renal care services and clinical laboratory services.
  • Medical clinics / centres refer to Clearbridge Health’s growing network of owned and operated primary healthcare points across Asia that enable it to deploy its diagnostic tests and medical technologies to end consumers. These facilities include a paediatric clinic in Malaysia, aesthetic and dental clinics in Philippines and Singapore, a four-storey multi-specialty medical centre in Philippines and a medical clinic in Hong Kong.
  • Strategic investments refer to interests in three medical technology companies that give access to new products and services while strengthening the Clearbridge Health brand through relationships with various industry participants and key opinion leaders. These investments include interests in
    • a microscope company that creates super-resolution imagery using licensed technology,
    • SGX listed Biolidics (SGX:8YY) which is developing cell enrichment systems that, when combined with other analytical tests, can be widely applied in cancer diagnosis and treatment and
    • Singapore Institute of Advance Medicine Holdings, which offers digital radiology and highly specialized treatment of some cancers. It is building the first proton therapy centre in Singapore.
  • More than 80 of Biolidics’ ClearCell® FX1 Systems have been installed across the world since its commercial launch in 2015.

Medical treatment will become more personalised.

  • Clearbridge Health is focused on the delivery of precision medicine through its offices and healthcare facilities in the region. We see high growth potential for the Company as doctors increasingly customize treatments to patients’ genetic composition. Emerging areas of precision medicine include diagnostics, e.g. direct-to-consumer DNA tests, drug sensitivity testing and cancer treatment (precision oncology).
  • With its network across Asia, Clearbridge Health is positioning itself to tap on this trend over the next five to ten years.

Portfolio of prized assets in Southeast Asia’s fastest growing markets.

  • Via acquisitions over the last two years, Clearbridge has established credible footholds in the Philippines and Indonesia. For instance, Clearbridge Health owns the largest chain of clinical laboratories and renal dialysis centres co-located in some of the best hospitals in Indonesia. Hence, Clearbridge Health will also benefit from growing demand for healthcare in these markets.
  • In Singapore, it has acquired a medical-cum-aesthetic clinic and a chain of dental clinics, thus giving it access to professional expertise that it can export and replicate in Philippines and Indonesia.

Associate Biolidics is making waves in China.

  • Clearbridge Health’s 24.8% owned Biolidics Limited (SGX:8YY) has been working with partners to develop clinical and laboratory tests using its patented technology to separate tumour cells from blood. Liquid biopsies can be used to detect cancer early and monitor disease and has been touted as a game changer in cancer treatment.
  • In the US, similar companies have captured the attention of pharma giants and have been the subject of several acquisitions over the last two years.

Key risks.

  • We noted that Clearbridge Health does not have a track record of positive profitability. These losses have been partly due to investments made in prior years. With a stream of profitable acquisitions, we expect Clearbridge Health to turn EBITDA positive in 2020 and report its maiden profit in 2021.
  • One key merit is that Clearbridge Health’s management has a track record of running and monetizing medical technology businesses.

Potential unicorn in the making.

Recommendation & Valuation

Investment case.

  • We are excited by the prospects of Clearbridge Health. Its positioning to ride on the growth of both precision medicine and demand for medical services in the region gives it a unique niche to compete against established players.
  • The realm of precision medicine offers much promise, with consumers or patients now signing for genome testing and genetic testing. More recently, individualised therapy has been approved by the US government, such as T cell therapy whereby the patient’s cells are modified to fight cancer cells.
  • Within the next five to ten years, we can expect more of such treatments to become available. Clearbridge Health will then be well prepared to ride on this growth with its ready platform of patients and primary healthcare touchpoints.
  • In the interim, there is the potential of various catalysts to unlock value. These catalysts include
    1. EBITDA and net profit turnaround at the Clearbridge Health level,
    2. the growth of Biolidics as a leading CTC platform equipment provider and
    3. potential spin-off of medical clinics / centres as a separate business.


  • In the case of Clearbridge Health, we chose to value the Company using the peer comparison approach. Given that the company is currently loss making, we reckon that forecasting uncertainty is high and that a discounted cash flow model over a long forecast horizon will not be meaningful. However, we compared the Company to three successful liquid biopsy / precision medicine companies listed in the United States.
  • Based on the lowest price-to-sales and price-to-book ratios of these three peers, we can value Clearbridge Health at 11.29x price-to-sales or 7.11x P/B, or at US$129.6m to US$273.0m. Taking the average of these two values, we obtained an estimated fair value of US$201.3m or S$271.78m. Based on an enlarged share capital of 659.55m shares (assuming the conversion of the Convertible Bonds), we arrived at a fair value per share of S$0.412 (rounded to S$0.410). See attached PDF report for detailed comparison.
  • While our valuation may seem aggressive, it is achievable provided the company delivers on growth. Precision medicine is a fast growing area. In June 2018, Swiss pharma giant Roche acquired 43% of precision medicine company Foundation Medicine for US$2.4 billion, after paying US$1 billion for a 57% stake in January 2015. This transaction comes about despite Foundation Medicine being loss making. However, it has several FDA approved diagnostic services and sold close to 22,000 clinical tests per quarter in 1Q18. In comparison, our valuation of US$201.3m for Clearbridge Health seems reasonable given that it is targeting the larger Asian market.

Refer to attached 24-page PDF report for complete analysis on CLEARBRIDGE HEALTH LIMITED (SGX:1H3) by Tayrona Financial.

Liu Jinshu Tayrona Financial Research | http://www.tayronafinancial.com/ 2020-01-31