Clearbridge Health Limited - Phillip Securities 2020-03-10: Building Up The Regional Footprint


Clearbridge Health Limited - Building Up The Regional Footprint

  • FY19 revenue and earnings were below expectation. FY19 revenue more than tripled to S$21mn. Clearbridge Health (SGX:1H3) turned EBITDA* positive in 2H19.
  • The ramp-up from IGM and Philippines post-acquisition and post-renovation respectively was slower than we expected. IGM accounts for 48% of group sales.
  • Clearbridge Health has built an impressive regional footprint of healthcare services across the region including Singapore, Indonesia, Philippines, Malaysia and Hong Kong. The lab test and renal care services in Indonesia are the largest contributor to revenues.
  • Maintain BUY with an unchanged target price of S$0.26. Growth in FY20e will be underpinned by acquisition IGM and Dental Focus and recovery in the Philippines. While still loss-making, we expect the company to clock another year of positive EBITDA in FY20e.

The Positives

Revenue surged to S$21.5mn.

  • In just 2 years post IPO in December 2017, Clearbridge Health has expanded revenues from just S$288k in FY17 to currently S$21.5mn. It has acquired two core assets in Indonesia (lab and renal care), aesthetic clinic and dental facilities in Singapore and a medical centre in Manila. IGM accounted for 48% of FY19 revenue (or S$10.3mn).

Turning EBITDA positive.

  • Clearbridge Health turned EBITDA positive (*exclude one-offs (fair value adjustments and other non-recurring opex), share option expenses and R&D expenses) in 3Q19 of S$0.38mn. This further grew to S$0.55mn in 4Q19.

The Negative

Operational challenges in Indonesia.

  • After acquiring IGM Labs in May19, the ramp-up was delayed in part to contracts still novating to Clearbridge Health. Another challenge in Indonesia is the long trade debtor days for government reimbursement. Trade receivables in FY19 rose 5-fold to S$10.7mn. After taking over operations, Clearbridge Health is taking measures to shorten the trade debtor days from the authorities.


  • We expect another year of strong growth for Clearbridge Health. The largest contribution will come from recent acquisitions – IGM and Dental Focus. Newly opened facilities in Malaysia and the Philippines will be another source.
  • Contribution from Hong Kong is at risk with Covid-19 outbreak disrupting patient flow from China.

Latest developments:

A) Healthcare system (lab and renal care)

  • PT Tirta Medika Jaya (TMJ): Renal dialysis facility operator in public hospitals located in Indonesia. It was acquired in Apr18. Presently in 21 hospitals with another 16 to be renovated. Focus is on larger Class A hospitals which can house as many as 100 machines. In comparison, the small Class C and D sometimes fit only 5 to 10 machines. The capital required for a new facility relate to fixtures and fitting and working capital while collecting receivables from the government (which can take from 90 to 120 days). Equipment cost is borne by the vendor. There is a huge growth opportunity ahead as there are 2500 public hospitals in Indonesia, of which 16 are Class A.
  • PT Indo Genesis Medika (IGM): Operates laboratories in collaboration with public hospitals in Indonesia (acquired May19). Currently, operating 13 clinical labs. Some of the typical tests are haematology, glucose, cholesterol, urine test, HIV, etc. Future growth will come from adding more hospitals. IGM is only present in 6 of the 16 Class A hospitals in Indonesia. There should be 2 or 3 Class A tenders available. Another area of growth is to add the more complex esoteric test. Clearbridge aims to export this model into CMLV (Cambodia, Myanmar, Laos and Vietnam). Similar to IGM, the model is a revenue share of 70% with the hospital taking the balance. The cost of operations are the consumables used in the lab. Staff cost is borne by the hospital.
  • SAM Lab: Move into the higher-margin esoteric test (e.g. oncology). Conventional test margins are too low. Esoteric test will tap on the regional sales network and clinics in Malaysia. In FY19, revenue fell by S$0.17mn.

B) Medical clinics/centres

  • Clearbridge Medical Philippines: Post-renovation of the 4-storey facility in Manila in 1H19, patient flow is improving, driven by growth in corporate accounts. Apart from pharmacy sales, other types of services include health screening, vaccination and visiting specialist.
  • Clearbridge Medical Group (Hong Kong): The outbreak has resulted in a drop in patients from China. Many patients come to Hong Kong for their HPV Gardasil 9 vaccination (guard against cervical cancer). Some patients are redirected to the Philippines. The recent relaxation of in regulations will allow Hong Kong doctors to administer such vaccinations onshore.
  • Dental Focus Group: Acquired the 9 clinics in Aug19. Will look to expand the operations through the acquisition of additional clinics and overseas investments. In emerging markets, GP clinics will be less profitable due to the practice of self-medication. However, dentistry cannot be self-medicated.
  • Clearbridge Medical Malaysia: The paediatrics clinic operations is starting to improve with referrals from 12 GP clinic partners.

C) Strategic equity investments in medical technology

  • Biolidics (SGX:8YY) (24.8%, with option for another 10.67%): The company collects live cancer cells for further downstream analysis. The direction is to push commercialisation through lab developed test (LDT) regime. Biolidics is working with Sysmex, SAM lab and labs in China for LDT. To push more LDT, specialist (e.g. oncologist) and key opinion leaders need to be convinced of the product.

Investment Actions

Maintain BUY with a target price of S$0.26.

Phillip Research Team Phillip Securities Research | https://www.stocksbnb.com/ 2020-03-10
SGX Stock Analyst Report BUY MAINTAIN BUY 0.260 SAME 0.260