Alliance Healthcare – SG Telehealth proxy play

September 2021

For those unfamiliar with Alliance Healthcare, check out my previous 2 written articles here:

Alliance Healthcare (or “Alliance” in short) is an integrated healthcare group that leverages technology to provide a broad suite of healthcare services, primarily in Singapore.

The Group’s business comprises 5 key segments:

  • Managed healthcare solutions
  • GP clinics services
  • Specialist care services
  • Pharmaceutical services and
  • Mobile and digital health services.

For managed healthcare solutions, the Group has arrangements with insurers and serves corporations through its Alliance Healthcare Network of self-owned clinics and panel of medical services providers, who offer outpatient healthcare and treatment at private hospitals.

The Group also operates 16 self-owned GP clinics, operating under the “My Family Clinic” brand name, as well as five self-owned specialist clinics providing medical diagnosis and medical or surgical treatments for ENT, colorectal and orthopaedic conditions.

In addition, the Group operates a pharmaceutical business engaged in the wholesale distribution of pharmaceutical products to hospitals, pharmacies and clinics in Singapore and overseas.

FY2021 Results

FY2021’s revenue ended June increased 8.4% to S$46.6 mil as compared to the previous year. This is attributable to higher revenue from the pharmaceutical services business segment and specialist care services business segment. The mobile and digital health services business segment also shot up 366% y-o-y due to the full year recognition and increased demand.

That said, the COVID–19 pandemic resulted in lower revenue from the GP clinics services and managed healthcare solutions segments. In turn, net profits fell 34.4% on a year-to-year basis.

On the other hand, the company still sports a healthy financial position with Cash and cash equivalents of $16.7 mil and total loans/borrowings of $6.8 mil.

Acquisition of SG IMED PTE. LTD- DATA IS KING

Its robust balance sheet allows Alliance Healthcare to have the ‘firepower’ to acquire other companies and this is exactly what they did.

On 8 September 2021, the firm announced that it is purchasing a 20% of the share capital in SG IMED Pte. Ltd. (“SGiMED”) for an aggregate cash consideration of S$630,000.00. This implies a rough valuation of S$3.15 million for SGiMED.

According to this announcement, SGIMED’s core business is the development and the leasing of their proprietary software, a B2B clinic management and electronic medical record solution (“CMS/EMR”) for medical service providers such as general practitioners, specialists and dentists (the “Hummingbird Software”).

Broadly speaking, the Hummingbird Software offers a fully-integrated and configurable practice management solution with features such as

  • an online appointment system
  • data analytics
  • medical billing and
  • pharmacy and inventory modules

Based on the unaudited financial statements of SGIMED for the financial year ended 31 July 2020 (“FY 2020”), SGIMED reported a net profit of S$30,263 and had a book value of S$44,057.

While the valuation of SGIMED may seems steep at first glance, there may be huge potential for exponential growth for the company based on the targets set out in the announcement which also highlights the growth trajectory SGIMED is looking to achieve (500 clinics by 2 years and 800 clinics by year 3).

Given that SGIMED is a technological platform business which is already profitable, the addition of new clients may suggest exponential profit growth for SGIMED and justify for the valuation Alliance Healthcare is paying now.  Alliance Healthcare have also been given options to raise its stake in SGIMED in the future- securing a valuable database management asset for the Group.

The Board believes that the partnership with SGIMED will also allow the Group to leverage its capabilities to create an integrated digital platform.

In particular, the Company will be able to promote its e-services to clinics using the Hummingbird Software as well as their patients, realising the economic benefits of the existing ecosystem’s transactions.

Moreover, through the development of joint products and services based on the Hummingbird Software, the combined entity will drive market share in the CMS/EMR space.

Tapping on Tele-Health Potential

The government has a strong focus on getting elderly vaccinated as they are of the highest risk group if they contract COVID-19.

However, there are many elderly who are immobile and unable to make their way to the vaccination centres.

On that front, Jaga-Me, a subsidiary of Alliance Healthcare, is one of three medical providers appointed by MOH to spearhead home vaccinations.

On top of providing home vaccinations, Jaga-Me also provide many other home-bound healthcare services including home nursing, home caregiving and more.

Virtual healthcare is expected to grow at a fast clip as it is spear-headed by the pandemic and also likely to be a hybrid model in the future. For a quick perspective, US-listed Teladoc Health (TDOC.NY) revenue has skyrocketed 300% in just 3 years since 2018.

Conclusion – Group’s Platform strategy is forming shape

To sum up, Alliance Healthcare remains as a defensive healthcare company with various business segments to diversify its offerings.

Following the Group’s acquisition of SGIMED and recent entry into mobile and digital healthcare over the last year, the puzzle pieces of Alliance Healthcare’s platform strategy is starting to come together.

In addition to the traditional healthcare segment (GPs, Specialists and Pharmaceutical services), Alliance Healthcare now boasts a formidable platform business which is unique to its peers and now includes:

  • Managed Healthcare (third party processor linking a network of more than 1,000 healthcare providers to corporations),
  • A mobile and digital healthcare platform (Jaga-me which links healthcare professionals to patients in need of mobile healthcare, or even corporates wanting mobile clinic services; HeyAlly- digital app which includes appointment booking in addition to telemedicine)
  • SGIMED (a B2B clinic management and electronic medical record solution – allowing better flow of information on patients which will translate to better patient management and care)

While it may take some time to scale all the operations (as with all platform business), the day when and if it scales, it may propel Alliance Healthcare to one of the powerful integrated healthcare player in Singapore in our view.

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