On 24 May 2019, Alliance Healthcare Group Ltd (AHG) has opened an invitation to the public to subscribe its IPO shares at S$ 0.20 per share. Its IPO Prospectus can be downloaded here – AHG’s IPO Prospectus.
Application for its IPO shares would close on 29 May 2019 and its listing date is set to be on 31 May 2019.
Question: ‘Should I subscribe IPO shares of AHG?’
Personally, I’d studied its IPO prospectus and would like to share my findings on AHG in this article. Thus, here are 7 main things to know about AHG before you subscribe to its IPO shares.
#1: Business Model
AHG is involved into four key business segments.
They include:
- Managed Healthcare Solutions
AHG offers a diverse range of managed healthcare solutions to two key groups of customers: corporations and insurance companies. Presently, AHG has entered into agreements with eight major health insurers and is serving over 2,000 corporations via its self-owned clinics and a panel of 1,000 medical service providers in Singapore.
- GP Clinics Services
AHG operates 17 GP clinics, where 16 of them are operating under the branding of ‘My Family Clinic’. It has 1 clinic operating under ‘Lee Clinic Pte Ltd’.
- Specialist Care Services
AHG operates 5 specialist care clinics, where it consists of 2 ENT clinics, 2 colorectal clinics, and 1 orthopaedic clinic. The 4 clinics are presently 100%-owned by AHG except for the orthopaedic clinic where AHG has 51% stake in it.
- Pharmaceutical Services
AHG procure pharmaceutical products and medical devices via Alliance Pharm, its wholly-owned subsidiary. Alliance Pharm has been granted a wholesale pharmaceutical license issued by the HSA and sources for its products from reputable partners in Singapore and overseas and would distribute them to hospitals, pharmacies, and clinics across Singapore.
#2: Breakdown of Revenue 2018
For financial year (FY) ended 30 June 2018, AHG has reported to make S$ 33.82 million in revenues.
Contributions from the four segments above are as follows:
|
No. |
Key Business Segments |
Amount (S$ ‘000) |
Amount (%) |
|
1 |
Managed Healthcare Solutions |
4,912 |
14.5% |
|
2 |
GP Clinic Services |
15,575 |
46.1% |
|
3 |
Specialist Care Services |
4,807 |
14.2% |
|
4 |
Pharmaceutical Services |
8,523 |
25.2% |
|
AHG’s Total Revenue 2018 |
33,817 |
100.0% |
|
#3: Financial Track Record
For the last 3 FYs, AHG achieved higher revenue and shareholders’ earnings. Its revenues had risen from S$ 25.85 million in 2016 to S$ 33.82 million in 2018. It is contributed by sales growth from all of the four businesses stated above.
Shareholders’ earnings grown from S$ 0.83 million in 2016 to S$ 3.48 million in 2018. Its earnings per share (EPS) increased from 0.25 cents to 1.48 cents in the 3-year period.
Meanwhile, AHG’s Return on equity (ROE) has grown from 20.5% in 2016 to 45.5% in 2018. This is contributed by improvements in profit margins from its managed healthcare solutions, specialist clinics, and its pharmaceutical divisions, which had offset the profit decline from GP Clinic services.
Figures in S$ ‘000 unless stated otherwise
| Year |
2016 |
2017 |
2018 |
| Revenue |
25,846 |
29,439 |
33,817 |
| Earnings |
513 |
1,345 |
3,080 |
| EPS (Cents) |
0.25 |
0.65 |
1.48 |
| ROE (%) |
20.53% |
36.42% |
45.53% |
#4: Balance Sheet Strength
As of 30 June 2018, AHG has S$ 3.12 million in non-current liabilities and a total of S$ 6.77 million in shareholders’ equity. Therefore, its gearing ratio is 46.05%.
In that period, AHG has reported to have S$ 18.98 million in current assets and S$ 16.84 million in current liabilities. Thus, its current ratio is 1.13.
| Year |
2016 |
2017 |
2018 |
| Gearing Ratio |
38.23% |
23.21% |
46.05% |
| Current Ratio |
0.78 |
0.89 |
1.13 |
Calculated from Data Sourced from IPO Prospectus of AHG
#5: Utilization of IPO Proceeds
AHG intends to raise S$ 6.4 million in gross proceeds from this IPO exercise. Out of which, AHG intends to utilise it:
1. Group Expansion: S$ 3.0 million
AHG intends to expand its network of GP clinics, specialist clinics and as well as medical facilities in Singapore. In addition, it plans to embark on a series of strategic alliances, acquisitions, and joint ventures.
2. Digital Transformation: S$ 0.5 million
AHG budgets S$ 0.5 million in investments into technology systems. For instance, it hires an IT vendor to build centralised clinic management & electronic medical record system for its self-owned GP clinics. Also, the group is developing an Electronic Queue Management System (e-QMS) to enhance experience and satisfaction of its patients at its GP clinics.
3. Expand Pharmaceutical Segment: S$ 0.2 million
It intends to upgrade of its storage facility for pharmaceutical products, establish its presence in Malaysia and bring in more products lines that would be used in its self-owned and panel clinics across Singapore.
4. General Working Capital: S$ 0.8 million
5. Listing Expenses: S$ 1.9 million
#6: Management
Upon the listing of IPO shares, Alpha Investment Holdings would emerge as the main shareholder of AHG with 64.2% shareholdings.
Alpha Investment Holdings (AIH) is currently owned by:
|
No. |
AIH’s Shareholders |
AIH’s Shareholdings (%) |
|
1 |
Dr. Barry Thng Lip Mong |
62.0% |
|
2 |
Dr. Loh Cher Zoong |
19.5% |
|
3 |
Dr. Goh Tiong Jin |
5.7% |
|
4 |
Dr. Yun Kok Onn |
12.9% |
Dr. Barry would emerge as the ultimate key shareholder of AHG as it owns 62% of AIH, which in turns, holds 64.2% of AHG.
Dr. Barry is appointed as Executive Chairman and CEO of AHG and would be influential to its future directions.
#7: Valuation
The IPO share is offered at S$ 0.20 per share. Based on 207.9 million shares, its market capitalisation works out to be approximately S$ 41.6 million.
In FY 2018, AHG has made 1.48 cents in EPS and 5.58 cents in net assets per share. Thus, it has a valuation of P/E Ratio of 13.51 and P/B Ratio of 3.58.
AHG does not have a fixed dividend policy.
Conclusion:
AHG has recorded improved financial results for the last 3 years and maintains itself a healthy balance sheet. So, should you subscribe to AHG’s IPO shares at S$ 0.20 a share?
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