IHH Healthcare Berhad (IHH) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Second Quarter and First Half 2020 Financial Results of IHH Healthcare Berhad Analyst's Briefing Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, 27th of August, 2020. I would now like to hand the conference over to our first speaker today to Jordon Tan from Investor Relations at IHH. Please go ahead, sir.

Thank you. Good evening, and welcome to the IHH Healthcare Second Quarter and First Half 2020 Earnings Call for the period ended 30th of June 2020. Thank you for joining us today. I'm Jordon Tan from Investor Relations. With me on the call today are Dr. Kelvin Loh, Managing Director and CEO; Mr. [indiscernible], Group Financial Controller; and Mr. Dilip Kadambi, Group Head Business Transformation. For those of you on the webcast, you'll be able to view and download our presentation slides and press release. The materials are also available for download on the IHH website. As for the sequence of the event, Dr. Loh will bring us through an overview of the results, the key highlights for the second quarter and the first half of 2020, an update on the COVID-19 and operational highlights for the group. Thereafter, [indiscernible] and Dilip will provide the financial highlights, before Dr. Loh wraps up by discussing the outlook and key takeaways for the group. We'll have a Q&A session after the presentation. So with that, I'll turn over the call to Dr. Loh. Dr. Loh, please.

Good evening, everyone. And thank you for joining us for this results briefing. We are living through perhaps the most significant crisis of our lifetime, and we know that this calls for unprecedented action. Thought we will give you today a lot more granularity during this quarterly results presentation. We hope this will help you understand how IHH has been impacted, how we have navigated this crisis and remain resilient even in the face of significant challenges. Let us move to Slide 5. On Slide 5, you see here an overview of our financial performance for second quarter and first half 2020. Naturally, our results reflect the profound challenges from COVID-19 that have impacted all industries, including healthcare. Our revenue and EBITDA declined year-on-year, and we reported negative headline and operational net profit. I would point out, however, that our underlying EBITDA margins remain healthy at 10.4% for the quarter and 16.4% year-to-date. While PATMI is down, it's also important to note that operational PATMI, or PATMI stripping out exceptionals, has been resilient at minus 3.3% and positive 1.7% for quarter-to-date and year-to-date, respectively. Our firm focus on executing our refreshed strategy has given us the agility to deal with this rapidly evolving circumstances head-on. Let's move to Slide 6. First, I would like to address what I'm sure you're all most interested to know about how our business is navigating COVID-19. In short, yes, we were impacted like everyone else. But I'm encouraged to report that we have rebounded from the worst of the impact, and we are confident about the way forward. The biggest impact was felt in April and May. This was when we saw lockdowns enforced across our markets and travel restrictions enacted. As a result, local patients postpone nonurgent and nonessential treatments, while international patients were unable to travel for treatment. We did, however, continue to treat a large number of urgent cases throughout the period. Our occupancy across our home markets dropped from 65% to 70% during pre-COVID times to between 30% to 55% in those 2 months, April and May. As economy started to reopen in June, we began to see some signs of recovery. Elective surgeries have resumed and local patients have come back. In fact, occupancy levels have rebounded to 40% to 60% for our home markets. By June, we have recovered close to 80% of pre-COVID volumes. We continue to see occupancies progressively rise for the group in July and August. As a result of this, the Group had a positive PATMI for June 2020. This, as you know, is no mean feat given the situation. We are, therefore, expecting a fairly sustained recovery. Moving on to Slide 7. I just spoke about our challenges and the more recent uptrend we have seen. But far more important is how we have managed to remain resilient. We did this by looking at the situation holistically and then focused our efforts to, firstly, protect our top line; and secondly, preserve our bottom line and cash flow. First, our top line. We knew our usual revenue sources would be under pressure. So we moved quickly to create new revenue streams, by diversifying our service offerings to capture new opportunities. One crucial initiative was to collaborate with government to help with the pandemic. Another was to roll out new initiatives that we knew would be in high demand, such as telemedicine. Secondly, to protect our bottom line, we have kept a firm eye on costs and managed our cash flows vigilantly. As part of that, we have deferred all noncritical CapEx for the year. As a result, our financial position remains robust with a strong cash flow and ample secured lines of credit that we can draw on, should the need arise. These steps are important, as we expect government support in some markets to taper off from Q3 2020 onwards. As we adapted for the impact of the pandemic, executing on our Refreshed strategy remained a focus. It is our Refreshed strategy that has given us the levers to be adaptive amidst COVID-19, while also ensuring we continue to deliver long-term value for all. On Slide 8, here you can see in more detail how we have moved to cushion top line impact from COVID-19. We found new revenue streams by adapting to the new normal and acting on emerging opportunities. Firstly, we did our part to work with governments to combat COVID-19. Taken together, the work we did on COVID-19 treatment and testing generated more than MYR 200 million in revenue for this quarter. To give you a sense of the scale of our testing capabilities, we have conducted about 300,000 COVID tests in Q2 alone and done more since. Secondly, we rolled out new initiatives to meet the evolving needs of our patients. One significant service we launched was telemedicine across all our home markets. We were already planning to do this as part of our Refreshed Strategy, but we expedited it in anticipation of the new needs of our patients. This enables us to connect with our patients virtually and give them peace of mind to still seek hospital care as needed. We took these initiatives while being able to stick absolutely to the most important commitment we can ever make, the safety for patients and staff is always our #1 priority. Moving on to Slide 9. Now I'd like to share with you some of the initiatives we took to optimize our bottom line and cash flow. As you know, IHH always had a strong balance sheet with a big cash buffer and strong cash flows. We have not taken that for granted, however, and acted decisively to reinforce cost and cash flow discipline to ensure we remain resilient. First, we deferred noncritical purchases and capital expansion projects across the network and 30% of our annual CapEx has been deferred after this year. Second, we are leveraging our scale to extract synergies and improve procurement costs. This includes our increased focus on digitization through telemedicine and digital integration. Third, we are continuing to proactively and vigorously manage interest costs and foreign currency exposure. We are also grateful to have received and utilize various government support programs across our markets. This has helped our short-term cash flows. Of course, this will taper in Q3 onwards. But as I mentioned, our own operations have now begun to rebound. On Slide 10. So if I can return to the big picture, our Refreshed Strategy helped us to both adapt to the fast-evolving situation and maintain our long-term growth trajectory. The investment thesis, it's still valid as before, if not more so. And we are still making longer-term players to grow even more efficiently. Let me give you 2 major updates on that front. Firstly, to leverage IHH international scale and achieve stronger synergies, India's Fortis Healthcare, in which we are the largest shareholder, intends to rebrand its hospitals to Parkway, reflecting the growing strength of a consistent brand internationally. Secondly, in line with our geographical cluster strategy that I mentioned before, which gives us more efficient growth, we will soon complete the acquisition of Prince Court Medical Center, which forms part of the Klang Valley cluster in Malaysia. In summary, we were impacted by COVID-19, but we acted swiftly and have seen an encouraging rebound and expect this to continue. It is not business as usual, but we are continuing to pursue the growth, I outlined, as part of the Refreshed strategy earlier this year. Moving on to Slide 12. Before going into each home market, I would like to highlight that one of our unique competitive advantages is that IHH has scale and a global network. This diversified portfolio and earnings has provided stability to our financial performance during this pandemic. In particular, because we have seen and would expect the epidemic peaks and troughs in each country comes in different timings. Thus, this diversity gives us group resilience in this new normal, as you will see in the next few slides. Moving on to Slide 3 -- Slide 13. I'll elaborate on our Malaysia operations. You can see the clear recovery after the easing of the MCO in June in this bar chart. You can see revenue and occupancies was at its worst in April, but the revenue trend line from there is clear. In May and June, there was a strong rebound in both revenue and occupancy. Now we are close to 80% of pre-COVID-19 levels, as domestic patient volumes recover. For Q2 2020 overall, revenue was down 23%, and EBITDA was lower by 56%, largely due to the COVID-19 impact in April and May. There was mitigating contribution from on-demand COVID-19 testing services, comprising about 8% of Malaysia's revenue for the quarter. Revenue intensity grew 21.9% to MYR 8,712 due to the shift in case mix towards acute and urgent surgeries amidst movement restrictions. So again, for Malaysia, clear recovery after the easing of the MCO in June. On Slide 14, moving on to Singapore operations. Singapore has remained resilient. Revenue was down 24% year-on-year, and EBITDA was down 35% to MYR 224.1 million, again, with the biggest impact in April and May. This was mitigated by significant contribution from COVID-19 services, including diagnostic testing, border screening and treatment of COVID-19 patients, which contributed about 10% of Q2's revenue for Singapore. The resilience of our EBITDA over the period reflects strong government support measures. EBITDA margins were supported by 1.2% from the government release. Inpatient admissions declined 34.4% to 12,940. We have, however, seen recovery in domestic patient volumes in June to about 80% of pre-COVID-19 levels as elective procedures resume. I just want to call out here that the increased occupancy in April and May was mainly due to the higher average length of stay for COVID-19 patients being treated, which has naturally come down in June. Those COVID-19 patients have been replaced by more elective cases in June. Revenue intensity increased 9.0% to MYR 35,731. So in Singapore, it was very much resilient. On Slide 15. For our Central and Eastern Europe operations, we saw a fairly significant rebound from June. During the quarter, revenue decreased 31%, while EBITDA declined 60%. Once again, this was largely due to the impact of COVID-19 in April and May, but mitigated by COVID-19-related services provided, which contributed about 9% of revenue. Inpatient admissions decreased 34.1% to MYR 35,821. This has now rebounded to about 75% to 80% of pre-COVID-19 levels. Revenue intensity grew 23.7% to MYR 10,114. We have also seen a strong rebound in number of foreign patients after Turkey reopened its borders on 12th June. This contributed 10% of revenues for Turkey during the quarter. And specific to Turkey, we have seen continued recovery of foreign patients revenues in the month of July, thereby increasing euro-denominated revenues. On Slide 16, for India operations, we are seeing incremental recovery. However, as you know, the COVID-19 situation there continues to evolve. Revenues declined 49% to MYR 416.6 million. We took on COVID-19 patients in India and expect to continue doing so into the third quarter. Our COVID-19-related services in India contributed to 15% of revenue during the quarter. EBITDA was down 198% to negative MYR 73.5 million. EBITDA margins are minus 17.6% for the quarter, however, moved towards positive by June. Inpatient admissions decreased 46.0% to 47,586 in Q2 2020. Our volumes have gradually recovered and were back to 65% to 70% of pre-COVID-19 levels in June. Revenue intensity increased 3.4% to MYR 6,424. Compared to our other markets, our hospitals in India have a relatively higher proportion of COVID caseloads, which are still present in India as of June. Before I pass over the call, I would like to provide a quick update on Gleneagles Hong Kong Hospital. There was minimal impact from COVID-19 on Gleneagles Hong Kong. In Q2, the hospital saw revenue growth, operational losses remained flat. Inpatient volume remained stable. In June, Gleneagles Hong Kong saw the highest inpatient emissions today. In Q2, we are now running at an average occupancy of 55% based on about 200 operational beds as the hospital continues to ramp up. You will see from the very granular month-on-month revenues and occupancy numbers, we are giving you this quarter for all our home markets that we were impacted by COVID-19, of course. But there is a consistent trend across the markets. That is, we have seen recovery in revenues and occupancy. Thank you. And I will pass the call now to [indiscernible] and Dilip to go through the financial highlights.

Thank you, Kelvin. This is [indiscernible] here. Moving to Slide 18 here. Given that we are 10 countries with 4 home markets, we wanted to share more on our performance on constant currency terms. You will see that currency movement have minimal impact on revenue and EBITDA of only about 1% to 2%. The erosion to revenue and EBITDA was primarily due to the impact from COVID-19. This, even as our Central and Eastern Europe operations saw the lira depreciate 11.9% against the ringgit year-on-year and reflects the strength of our international and diversified portfolio. On Slide 19, in terms of the exceptional items. In this quarter, we recognized a foreign exchange loss of about MYR 94.8 million from the translation of the non-Turkish lira borrowings and a fair value gain of MYR 43.3 million on its cross-currency swaps in relation to non-lira borrowings. The net exchange loss of MYR 51.5 million is lower than the MYR 79.5 million loss in Q2 2019. On Slide 20, the group remains in a strong financial position to weather the COVID-19 pandemic. Our balance sheet is robust, and we are well-positioned in terms of our funding and liquidity. As at June 30, 2020, net debt-to-EBITDA stood at 1.85x. The increase was on higher loans and borrowings taken prudently to finance working capital and capital expenditure and our lower EBITDA performance. Our cash position was very healthy at MYR 4.3 billion, which includes the MYR 2 billion place in escrow for the pending open offer for Fortis and Malar. I will now pass the call over to Dilip to round out the financial highlights.

Thank you. Moving on to Slide 21. You will see that our cash from operating activities remain fairly robust. We have also reduced the net cash spend on investing activities in Q2 2020 to MYR 91 million from MYR 321 million in Q1 2020. Overall, we have deferred close to MYR 1.4 billion in CapEx spend as against our budget for FY 2020. At the end of June 2020, our cash balance is at MYR 4.3 billion, and we have adequate liquidity to fund acquisition of Prince Court Medical Center. Moving to Slide 22. I would like to share what we have done further deleverage our non-lira debt for Central and Eastern European operations. Per plan, we communicated a year ago. We have already significantly reduced our non-lira gross debt to EUR 267 million as of December 2019, you may recall. Since the beginning of this year, Acibadem has refinanced another EUR 37 million of debt into lira-denominated debt and repaid EUR 10 million. By June, excluding the European operations, our total non-lira debt stands at EUR 180 million. This amount also includes medical equipment leases and finance leases of about EUR 82 million. Post Q2, in July, we have utilized the CEE operations cash flow to pay down its foreign currency debt by further EUR 25 million, reducing our FX exposure to EUR 153 million. I shall now pass the call back to Kelvin to share the key takeaways and outlook for the group.

Thank you, Dilip. We are now on Slide 24. Let me recap on what has been achieved during the pandemic period. We have been agile in addressing the specific impacts of the dynamic, while keeping our longer-term growth trajectory intact. You have seen that we continue to deliver on the key strategic pillars of our Refreshed Strategy. The acquisition of Prince Court and Fortis intend to rebrand to Parkway are the most recent examples of that. I'm very confident that our strategy underpinned by our commitment to provide unrivaled care and build trust will enable us to capture emerging opportunities and come out of this stronger. Moving on to Slide 25. These are the key takeaways. Amid these challenging times, we expect there to be continued impact from COVID-19 for FY 2020, especially if there are further disruptions from subsequent outbreaks and renewed lockdowns. We will continue to mitigate impact by creating new revenue streams, improving case mix, keeping tight lid on costs and capital discipline, while supporting governments in this fight. We are, especially, encouraged that patient volumes have started recovering since June. We continue to see this progressive recovery across July and August. We are, of course, encouraged also that we were PATMI-positive in June. With our strong financial position, operational resilience and continued focus on delivering our Refreshed strategy, we are well-prepared to ride out this dynamic and deliver long-term growth. Thank you very much, and we are now happy to answer your questions.

[Operator Instructions] With that, operator, please proceed with the Q&A session. Thank you.

[Operator Instructions] We have a question coming in from the line of Divya Gangahar from Morgan Stanley.

Two questions from me. The first one is just to understand the average revenue per inpatient for 3 key markets, which is Singapore, Malaysia and Turkey. So we've seen that increase in the second quarter, by various degrees, with Singapore at 9% and Malaysia as high as 22%. Could you give us a sense on how we should think of this going into 3Q and 4Q? Like what are the COVID patient intensities, revenue intensities versus non-COVID, so that we get some gauge whether this is sustainable or not? So that's my first question. And my second question is just on the foreign patients, particularly for Singapore. Are there any current arrangements or green channels that you can talk about, which would help some of this come back?

Thank you very much. This is Kelvin here. So on the first question, maybe I'll just give you the principle as to how things -- how case mix is -- the revenue intensity is affected during these COVID times, right? So there are actually 2 countervailing forces, generally. One is, as countries go into lockdowns and into COVID times, patients tend to defer procedures, except for the relatively more urgent, right? Or in other words, when they are sicker. So that is a driver of higher revenue intensity because that case mix goes up. Now the other countervailing force is that if the situation in the country, such that it allows for COVID patients to be taken in and the COVID patients are largely medical patients by and large -- I mean, there are some exception of sick cases, but by and large, they are -- they may be relatively well medical cases, which stay a couple more days in ward, they are generally of lower revenue intensities. Further, in some countries, too, there may be pricing caps as well. So those are countervailing forces. So in Malaysia, for example, by and large, the private hospitals were not taking in COVID patients. So you can see the first force come into play that I've spoken of, and that's why you can see the revenue intensity going up. In Singapore, the revenue intensity was, sort of, flat because both the forces came into play. In Singapore, we took in quite a number of COVID-19 patients because we were helping the government deal with a pandemic. So that's why you can see it, sort of, balance off. So that's a general principle, and you can apply that in whichever market. How do we think about that going forward? Well, it really depends on how the COVID situation plays out then. So in Malaysia, if you take the assumption that we are approaching a new normal and it continues not to take COVID patients. And if then the other elective cases start to come back and volume in that sense goes -- tracks back towards the normal case mix, then you would expect that to start to come back towards normal. However, if the -- in Malaysia, if the COVID situation continues to escalate, people defer a lot of elective, then of course, the intensity, you'll see, vary. But hopefully, that gives you a picture of sort of a mine map, how things affect -- how revenue intensities affect them. Does that help?

Yes, yes. That's very helpful. Just on Singapore, can I clarify? Like what you said is that it's -- there are some offsetting factors on COVID patients being lower intensity, but also the urgent cases coming in. What trends are you seeing now that clearly in Singapore, things have settled a bit. How should we think of that getting offset in the third quarter? Do we go back more towards the normal levels now that COVID is better contained?

Nobody can predict it for sure. But as you know, in Singapore, right now, at least for now, the COVID situation is quite well controlled. So as I mentioned, the COVID volumes by June and beyond had largely been replaced by this -- the elective cases.

Got it. Okay. Yes, that's clear on the first part. And then the second one was just on the foreign patient revenue trends, I mean, the green channels? Yes. I mean, any green channels that you have established with or any talks going on, on bringing patients back to Singapore?

I think all the green channels publicly announced, so you know them. Suffice to say that for now, in most of our markets, the foreign patient is very much curtailed with the exception of Acibadem in Turkey, which, as I already mentioned, has seen foreign patients coming back pretty strongly because the government had reopened its borders in June to medical travel.

We have the next question coming from the line of Mr. Shyam Srinivasan from Goldman Sachs.

My first one is on Gleneagles Hong Kong. Can you just quantify the kind of revenue trend and the operating losses? Last quarter was at MYR 40 million loss. So I'm just trying to get what is the run rate for revenue for Gleneagles Hong Kong? So in the North Asia part, that we see the disclosure now, we don't get the new and the old. So if you can help us with that number, please?

Shyam, thanks for the question. I'm not too sure what time frame are you referring to, but what I can tell you is that Hong Kong, by and large, as I mentioned, has not seen an impact from COVID-19. In fact, right through Q2, we have seen continued rise in occupancies and revenues.

Yes. So Q1, is it expansion Q-o-Q, Kelvin, that's the question I had? Have we seen increased -- is Q2 larger than Q1 in terms of revenue for Gleneagles Hong Kong?

Yes, it was.

Okay. Okay. And it's a reflection of -- you also mentioned in your opening remarks, this is the highest level of -- can you give us some more qualitative sense on what's working in the GHK? Because this has been some kind of a slower ramp-up in the past. So what's changed on the Hong Kong hospital?

So actually, I'd say that our Hong Kong hospital, as with all new hospitals, right, in the first 1 to 2 years, you see a relatively more gradual ramp-up because we are a new market entrant in a new market. It's a first hospital there. It takes time to establish processes and brand recognition. I would say that then subsequently, we expected, and we did actually see a pretty fast ramp-up. But then as you know, there was a social situation in Hong Kong towards the end of 2019, which, of course, impacted. And then subsequently, there was COVID-19 that you could argue had impacted the ramp-up, but happy to -- like you know that actually, it didn't cause a decline. I suppose it's fair to say that COVID-19 simply reduced the rate of the ramp-up that we had expected. But all-in-all, no decline.

Got it. And my second question is on the Malaysian operations. I think -- team, I also want to congratulate the disclosure and the presentation changes that you have done. I think this is very, very useful for, I'm sure, analysts and investors alike. So I just wanted to compliment you on that. I'm just looking at chart on the Malaysian operations. So you said 80%, we are now back to pre-COVID levels, and if you just explore whatever foreign patients. So what is the occupancy in July and August? And if I were to marry that with the EBITDA margins, which was 16% -- 17% for Q2, do you think we are now probably doing closer to where we were pre-COVID in the Malaysian operations?

So thanks, Shyam. As you know, we don't give the forward part of our guidance. But overall, qualitatively, suffice to say that the trend, the trajectory that we have shown here in Q2, we are happy that it's continued to progressive recovery beyond that.

Got it. Okay. And then last question, team, is on the cost control measures. Clearly, that has worked in Q2. Can you -- are you quantifying at this point of time any kind of a cost saving for the remainder of the year for the second half? And is there anything that you're calling out in terms of the large items that you think that can help you get there? If you can highlight that, please?

I think the cost saving numbers, by and large, we have spoken of this directionally. What do we do about rest of Q3 and Q4, even though we are seeing recovery, of course, we continue to be as prudent and vigilant as possible. So everything that we have said we are doing, we continue to do.

The next question comes from the line of Rachel Tan from DBS Vickers.

My first question is on, I think it's quite encouraging to see occupancies have been creeping up, up to June. Just wondering what you are seeing in July and August, have we seen any of the markets recovering back to pre-COVID levels for their local patients? I mean just take foreign patients aside, any of the markets, have we seen back to COVID -- pre-COVID levels?

Thanks, Rachel. Let's just say that the -- from -- towards July and August, we really have seen pretty strong, good recoveries of the domestic patients. Much of the -- you can see the data, sort of, in June, where the recovery was certainly pretty strong. And I think roughly, you know the foreign patients in the respective markets. So you probably can, sort of, get a good sense in that way.

Okay. Any creep up in intensity in July and August? I'm just thinking from the perspective that because there were then some delays. Do you see intensity picking up a lot more?

Yes, I think -- you can probably work out the trajectory if you, sort of, think about what I just explained earlier on the first question with regards to revenue intensities for the respective markets. So personally, I wouldn't pay too much attention to the Q2 revenue intensity as any form of indicator going forward because things are evolving, right? So you may see a big spike in Malaysia, for example, that's because of the lockdown MCO situation, people defer all the small things, people come only for the big things. But then as volume picks up, you would expect some normalization, right? In Singapore, I think the good news is that COVID is down. So we expect that dilutive feedback could go away. So I think that you will -- sort of, can imagine as well. On the other hand, as more and more of the elective cases come back, then the effect of only having urgent cases also comes back. So I think it's fair to say that if things go back normal, then we expect normalization -- progressive normalization. If things change again and then things can always -- the revenue that will take the kind of effect that as we are seeing in Q2 because of the forces that I talked about. Does that help?

Can I also get a sense on how much of the job support or wage support scheme that you have already recognized in first half? And how much do you expect to recognize in second half?

I think we had said that for Singapore, the impact on the -- talking about in general or specifically?

I guess the largest portion is in Singapore, but I do see that you have some great support in other countries, right? So maybe collectively, yes.

Yes. So in Singapore, you can see the -- we are, given the impact on the second quarter, improving margins by that 1.2%. Do we expect it to be always that way for Singapore, the markets? The answer is probably no. But fair to say that then, pari passu, of course, we are seeing operations improve as well and volumes pick up as well.

But is there a number that we can estimate number of how much is it that you are getting from the job support scheme or the wage support scheme?

Yes. I think if you look at the impact on the EBITDA margins, you can roughly work that also. For Q2, certainly, you can work it out. Going forward, I think things are evolving. So -- I mean the growth may still change in countries where we got support. As you know, time to time, governments are still announcing changes in level of support, how much support, so I think it's a bit hard to just put a number to it.

Okay. All right. Then maybe on the Malaysia market. I saw that, actually, their EBITDA fell a lot more compared to the revenue drop. Just wondering whether any increase in cost that's affecting it? Or is it just purely patients volume down?

Sorry, which market is that?

Malaysia.

In Malaysia, no. I think it's quite fair that if the revenue dropped by 23%, it would not be that surprising that EBITDA drops by 56%, given that, as you know, hospitals are -- have a fairly sizable fixed costs, right?

Okay. Yes.

Yes. That's right.

Okay. So there were no -- any additional costs involved in Malaysia, higher increase in cost during the COVID times?

No. I mean if you sort of look at revenue versus EBITDA margins. When revenue drops by 23%, it's not that surprising that you get about a 50-odd percent change in EBITDA. So there wouldn't be again any unusual increases in costs. In fact, we have done pretty -- done fair bit of cost control.

Okay. All right. And can I also confirm -- sorry, I'm just asking quite a number of questions. But then those Hong Kong EBITDA losses, you would say that the EBITDA losses are roughly about flat, so should be about MYR 40 million this quarter?

Suffice to say that, yes, Q2, definitely, we have seen improvements in the revenue. Operating losses, yes, probably it was about flat.

Okay. Any plans to open new beds? I see you have opened actually another 20 beds. Any plans to open new beds in the second half given that Hong Kong now has the second and third wave creeping up, right?

Well, we will see if, indeed, we continue to get good growth in volumes, then, of course, we'd open additional beds, but we'll be extremely cautious about the costs, given that now we have a fairly good scale.

Okay. But volumes haven't seen a decrease with the second and third wave coming into Hong Kong?

We haven't seen inpatient volumes affected, I should clarify that.

Okay. Okay. Got it. Just very quickly, any updates on Gleneagles Chengdu or Shanghai?

So well, on Shanghai, we are calling the hospital Parkway Shanghai Hospital now. There has been a delay in the construction. So that's not operational. In fact, it's delayed. It's likely to open only in 2021 or, rather, we are likely to complete that only in 2021 instead of 2020, as we have said before. But of course, we try to manage our developmental costs during this time. Now as for Gleneagles Chengdu, it's still relatively early. It just opened in October. And barely 3 months after that, came the full force of COVID, right? And China has just reopened in April. And so with that, there is a gradual resumption of business. What we are doing is, we're keeping the number of operational beds low at 30. And therefore, we manage the costs as tightly as possible. Overall, in Q2 '20, our start-up costs was only about MYR 9 million. We continue to ramp up specialties there. So it's in progress developing our network, getting more doctors on board. We initiated telemedicine as well, and we have a surgical training center in progress as well.

Okay. Okay. Probably just one last question. I think on the acquisition of the Prince Court. Can you give us a sense how it will change your net debt over EBITDA? And whether would it impact any of the debt covenant post the acquisition on Prince Court?

MJ, do you want to help with the question?

So the way we are looking to fund -- sorry, MJ, do you want to go on?

Carry on there, Dilip. Carry on.

So the way we're looking to fund the Prince Court Medical Center acquisition is by 60-40 debt equity. So we will use some internal accruals, and the remaining would be through debt. 60% would be through debt.

Okay. Does it change your net debt-to-EBITDA ratio?

Yes. Yes, it would change.

How -- would you give us a sense roughly how it would drop to? Or how much it would drop to?

So yes, I guess, from the current position in terms of where we are, I guess, you probably need to add on the extra debt that we would take for to the extra 60% of the acquisition.

Okay. But you will still be well above 1?

So yes, roughly -- yes, currently, if you look at the net debt-to-EBITDA, it's at about -- as of June, it's at about 1.85. So I guess it'll probably move by about 20% given the extra debt that would go on.

We have the next question coming from the line of Amanda Foo from Crédit Suisse.

I have two quick questions from my end. Firstly, Dr. Kelvin, you mentioned that the telemedicine rollout has helped with diversifying your revenue stream. So I was wondering if you could give us a little bit more color as to the contribution of telemedicine across the markets in the second quarter. And also, now with a lot of the markets with easing lockdowns, how has the revenue growth of patient volume growth been since? And also secondly, would you mind giving us an update for the Supreme Court stay order on Fortis?

So on the Supreme Court order on Fortis, that's still pending, as you know. We are hopeful that the case will be heard as soon as possible. I mean we have faith, of course, in the Indian judicial system, and we're looking forward to a positive outcome. On the second -- sorry, on the first question, can you repeat your question?

So I basically just wanted to find out a little bit more about your telemedicine contribution. Firstly, in the second quarter, how much patient volumes did it contribute across the market? And also -- so since then, how has that?

So firstly, let me caveat by saying that we see telemedicine not as a replacement for our business or our revenues. As you know, much of our business is in the acute hospitals business. And therefore, by and large, the revenues largely because of the procedures and hospital state that we do, which cannot actually be replaced by telemedicine, right? So how we see telemedicine is that it's an extremely useful adjunct that helps to connect with our patients, give them peace of mind and enables them to understand, communicate with doctors and know when they need to come to our hospitals, right? And to give them a peace of mind that it is safe to come by hospitals. So that's how we see the purpose of telemedicine. Having said that, I had mentioned before on my -- the previous quarter that in some of our markets, it's growing as high as 10% of our outpatient volumes. So that's still roughly where things are. But again, how we see telemedicine still and the digital ability to connect with medicine -- these patients through various channels. It's exactly why I said, it will create that hybrid model of care that enables a seamless care in these times. In fact, I think it's great that in some ways COVID -- it's been beneficial that COVID has accelerated that because that is actually even more efficient model of care. So the part that is consultative and does not require actual inpatient hospital care than can be done on an outpatient basis. But as needed, then we get the patients to come to the hospital.

So just to make sure I got you right, you're saying that the telemedicine volumes are pretty much -- well, in terms of contribution to your outpatient volumes, it is still pretty stable at about -- as high as 10%?

In some markets, yes. Correct.

Okay. Because looking at the easing of lockdowns, less people would be inclined to use digital services. So I just wanted to find out on that front.

No, it hasn't actually reduced. In fact, if at all, we see continuing growth. It is continuing to grow actually.

[Operator Instructions]

Operator, we will take questions from the webcast. Hold on. We have a question from [ Linda Lovera ] from [ Aberdeen ]. Just curious in the event that a vaccine is found in the future, how will it be administered in your key markets? Are administration of vaccines profitable? Or will it be somewhat social services to the society?

Thanks, Linda, for the question. So firstly, it's relatively early days yet, in my view, if at all, I mean, I would imagine that the quickest vaccine to come around is still in order to administer, at least, months away. How would it be administered? Of course, as a large global health care provider, we'll be extremely keen to help in this provision of vaccines. In different markets, they will -- it is possible that there are regulations around how such our vaccines are being administered. We'll, of course, be respectful and follow the regulations in each country. Overall, I mean, generally speaking, as a private health care provider, we do our best to benefit society. But of course, we try to do in such a way that it's not obviously loss-making for us. But we recognize that this is an important social function. So to the best of our ability, we, of course, want to help and contribute to this fight with the pandemic.

We have another question from [ Sharisma Nazri ] on the webcast. What is the current procedure set by the Singaporean government in terms of allowing foreign patients entry into Singapore. And what is your expectation of when foreign patient numbers will return to pre-COVID levels?

Thanks. So really, I think the answer is, we don't know. We all hope that the COVID-19 situation gets under control as quickly as possible in various countries, and therefore, gives confidence within countries to open borders. I think, as you have seen in the news that in the most recent times, in the last 1 month, there has been many discussions around reopening of this green lane facility being called in terms of various travel being increasingly allowed. So we are hopeful that at some point, and hopefully soon that even patients too can be allowed.

If there are no further questions, we will now conclude the IHH Healthcare Second Quarter and First Half 2020 Financial Results Briefing. Thank you for joining us today. If you have any other questions, please contact me via e-mail at [email protected]. Thank you.

Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you all for your participation. You may disconnect your lines now. Thank you.