Econ Healthcare prices IPO shares at S$0.28 each

OPERATING as a private business for close to a decade had given Econ Healthcare the leeway to restructure and prepare for future growth, but the private nursing home operator is now ready to go public again.

The firm had on Friday lodged its final prospectus, offering around 50 million shares at S$0.28 each for placement in its initial public offering (IPO). The shares, to be listed on the Catalist board, comprise around 48.2 million placement shares and 1.8 million shares under the Singapore public offer.

Based on the offer price and the post-offer share capital of 257 million shares, Econ Healthcare's market capitalisation upon the listing will be approximately S$72 million.

The public offer opens at 7 am on April 10 and will close at noon on April 15. Trading is expected to commence on April 19. DBS is the sponsor, issue manager, underwriter and placement agent.

Econ Healthcare first listed in 2002 and was privatised in 2012 by founder Ong Chu Poh and European private equity fund group EQT.

Delisting back then came "unexpectedly", said Mr Ong who is still executive chairman and group chief executive of the firm. But being backed by a strong fund meant a chance for the group to speed up growth, prompting the firm to take up the offer then.

Mr Ong had in 2016 bought back all the shares of the firm, ending his partnership with EQT to gain full control of the company. "We took back the whole company to our own management as a private company and we were able to do whatever we wanted," he told The Business Times in an interview. This included the restructuring to prepare for the next stage of growth.

On the decision to list again, he said he believes the aged care industry is a sustainable one: "Since 2002, we have been growing every year and providing profits for our shareholders.

"And with the Asia-Pacific region ageing, the potential is great. I think we would be able to deliver very good profits for our shareholders."

The IPO and issuance of shares will deliver about S$11.5 million in net proceeds, which will go towards expansion plans in Singapore as well as overseas, upgrading of existing medicare centres, nursing homes and other facilities as well as general corporate and working capital purposes.

Econ Healthcare has two business segments: One is its network of medicare centres and nursing homes, and the other, its operations and ancillary services such as providing healthcare training services, offering traditional Chinese medicine services at its clinics, and operating senior activity centres in Singapore.

Euromonitor said it was the largest private nursing home operator by its 2019 revenue receipts from Singapore and Malaysia; its market share in the two countries is 27 per cent and 43 per cent respectively.

The group now runs 10 medicare centres and nursing homes in Singapore and Malaysia, with a total bed capacity of 1,376. It has also been appointed as an operator for two upcoming nursing homes in Singapore - Econ Medicare Centre and Nursing Home - Henderson, expected to be operational in H2 2022, and Econ Medicare Centre and Nursing Home - Jurong East, expected to be operational in 2025. This will bring total bed capacity to 2,388 in 2025.

It also recently expanded into China, with the establishment of Chongqing Nursing Home, which is expected to commence operations this year. Also in the pipeline are potential plans to establish and/or invest in two additional nursing homes, with the intention of ramping up total bed capacity in China to approximately 2,000 beds by 2025.

For the first six months of FY21, it generated a revenue of S$10.2 million, down from S$11.1 million in the corresponding year-ago period due to there being fewer private residents. There was a slight increase in operating subvention grants from S$7.5 million in H1 FY20 to S$8.4 million in H1 FY21, due to the increase in number of beds occupied by subsidised residents, partly because of the Covid-19 impact on hospital resources.

First-half FY21 net profit more than doubled to S$3.7 million, from S$1.5 million a year ago, but excluding exceptional grants, it would have been S$1.9 million.

The company currently does not have a fixed-dividend policy. The board intends to recommend and distribute dividends of at least 35 per cent of net profit after tax attributable to shareholders generated in FY2021, FY2022 and FY2023.

Among its growth strategies is an asset-light business model by leasing and operating to generate high investment returns. It also intends to increase its pace of expansion through means of organic growth, merger and acquisitions, joint ventures and strategic collaborations.

To meet the growing demand of nursing home care, the group is looking towards new models of care. Its upcoming medicare centre and nursing home in Henderson, for instance, will offer a cluster-living concept instead of isolated rooms, also known as a household concept.

Care offered will also be more "supportive and enabling" in nature for the elderly to have a sense of independence and to lead the golden years of their lives in meaningful and fulfilling ways, said executive director and deputy CEO Ong Hui Ming, Mr Ong's daughter.

Technology and innovation are also key to enhancing care services at Econ Healthcare's nursing homes. Notably, its Chongqing Nursing Home will house an automated robotic kitchen and intelligent eldercare panel, which offers round-the-clock monitoring of the well-being of elderly residents.

Mr Ong also believes in investing and grooming talent to bring the best people on board to run the company. While his daughter is now on the board and his son Xander Ong is head of development, Mr Ong said: "The succession plan is not only for my own family members, but for anyone else who is qualified, shows commitment and is efficient at work."

"Because if we grow, I need many CEOs and many department heads."