SINGAPORE (July 29): Temasek Holdings-owned Heliconia Capital Management is investing $5 million in Catalist-listed HC Surgical Specialists, to support the endoscopy chain’s regional expansion.
The $5 million will be invested through a three-year convertible bond, at an annual interest rate of 5.5%. According to the July 26 agreement, Heliconia has the option to convert to HC Surgical’s ordinary shares at 53.6 cents per conversion share.
Heliconia will also receive a three-year option to subscribe for up to another $5 million of new ordinary shares in HC Surgical.
The issuance of the convertible bond and the grant of the option are subject to customary closing conditions, which include the receipt of approval-in-principle for listing of the new shares to be issued.
“With the support from Heliconia, we will be in a stronger position to expand and deliver top quality healthcare services to our patients in Singapore and overseas,” says HC Surgical chief executive officer Heah Sieu Min.
The medical services company currently has some 16 clinics scattered around Singapore, focusing on providing endoscopy – a non-surgical procedure used to examine a person’s digestive tract.
With the latest investment, it intends to expand its presence in Asean to tap on the growing regional healthcare market riddled by an ageing population and the prevalence of chronic diseases amid rising affluence and an expanding middle class.
World Health Organization data estimates that the average total healthcare expenditure per capita in Asean is currently about 4% of the region’s total GDP. And this is expected to increase as countries around the region make plans to increase investments in the sector.
Public private partnerships are also becoming a preferred option to boost availability and superior quality of medical treatments provided in the region.
One of the key markets that HC Surgical is eyeing is Vietnam, where the firm hope to leverage Heliconia’s contacts to forge a presence in.
Already an exclusive provider of colorectal cancer for eligible insured clients of AIA Singapore, the company also expects increasing demand from Singapore and the region for endoscopic procedures such as gastroscopies and colonoscopies.
Derek Lau, chief executive officer of Heliconia, notes that HC Surgical has “tremendous growth potential” on the back of rising awareness in preventive healthcare in Singapore and the region.
For the FY19 ended May, HC Surgical reported a 61.4% jump in earnings to $7.2 million, from $4.5 million a year ago.
This was mainly aided by a fair value gain of $2.8 million on financial assets at fair value through profit or loss, following a de-recognition of investment in an associate in December last year.
FY19 revenue rose 14.3% to $18.3 million, mainly due new subsidiaries acquired during the current financial year and increased revenue from existing subsidiaries.
Earnings per share grew to 4.83 cents for FY19, compared to 2.99 cents for FY18.
The directors of HC Surgical have recommended a final dividend of 1.2 cents. Together with an interim dividend of 1.0 cents paid earlier, this would bring the total dividends for FY19 to 2.2 cents per share.
See: HC Surgical Specialists reports 61% rise in FY19 earnings to $7.2 mil on higher revenue and other income
Shares in HC Surgical climbed as much as 7.2% to 59 cents on early morning trading on Monday following news of the Heliconia investment.
As at 11am, shares in HC Surgical are trading at 56.5 cents.
