IHH Healthcare Berhad (IHH) Earnings Call Transcript & Summary

Good evening, everyone. Thank you for joining us today at a very short notice. And so we would like to take the opportunity to actually give everyone and for our management team to be able to discuss about the proposed acquisition of Island Hospital. I'm sure many of you would know me, I am Penelope from the IHH Investor Relations team. And so with me today, which is a familiar faces to many of you out there, Dr. Prem Nair, he's our Group CEO; and Mr. Dilip Kadambi, who is our Group Chief Financial Officer. And of course, Mr. Ashok Pandit, who is our Chief -- Group Chief Corporate Officer. So Dilip will cover the financial aspects of the transaction. And following that, Dr. Prem will share the strategic rationale before we actually move into the Q&A to address your specific queries. As for the presentation materials, you can actually download the deck on the IHH website under the IR tab. So with that, I'll turn the call over to Dilip. Dilip, please?

Thank you. Thank you, all. Thank you for joining at short notice this evening. We believe it's a very strategic and important acquisition for us and which we wanted to share with all of our investor community as well. I've always mentioned in the past, whenever I meet you, that we will be disciplined about our M&A strategy, and we will look at 4 key pillars in every acquisition that we do. We believe Island acquisition is a very transformative acquisition for the group. It's a very important cluster. And the 4 key pillars that I've already been talking about. One is on a stand-alone basis; the asset has to be a high-quality asset. And I can tell you, and you will see in the subsequent slides that Island is a really high-quality assets doing extremely well in the Penang Island. Number 2, I've also mentioned in the past that we would like our acquisitions to create a network effect, meaning to say it adds to our cluster or creates a new cluster in itself. So I can, again, if you look at Island Hospital, it strengthens our Northern cluster, in Penang, where we are operating at high utilization and we're currently in the underway to expand our capacity in Penang ourselves. Number 3 is in terms of synergies. I mentioned in the past, again, that synergy and value creation plan is very important to us. We are not here to buy a stand-alone hospital that does not add value to our overall network or create synergy. Here again, you will see that we have -- there's a clear synergy plan that we want to drive between Island and the IHH Group, which is quantified. And last but not the least, we have to be disciplined about valuation. You've seen us in a couple of situations in the past, where we walked away from the transaction, while you've also seen us be disciplined about some of the valuation that we've paid, for example, in Timberland, et cetera, that we executed the transaction itself. So again, if you look at all of these 4 mattresses, it's a clear tick. It kind of adheres to the philosophy of our M&A strategy. So with that, if you look at the overall transaction value, for a 100% stake in Island, we are paying equity value of MYR 3.9 billion. I must focus here and highlight the fact that we also have a land bank. We have vacant development capability there. And the land alone is valued at about an MYR 220-odd million. And the second thing is if you look at our forecasted 2024 is almost there in terms of year-end. And if you look at forecasted EBITDA for Island, and if you look at the multiple, it's about 19x EV EBITDA multiple for the hospital that we just bought. I must also highlight here that if you look at a 1-year forward number, which is 2025, it does even better given the growth that we have seen in the history -- historically, in the past, between '23 to '24 and we think that growth momentum would continue in '25 as well. So '23 over '24, we saw almost a 45% growth in our EBITDA, and we see some of the growth momentum continue into '25 as well as we ramp up the hospital and fill capacity. I also mentioned there's a clear value creation plan. We've identified both revenue synergies as well as cost synergies and we think there's close to about MYR 200 million of value creation and synergies that we can drive over the next 5 years. In the next 1-year alone, there's a clear plan to derive value of about MYR 25 million just by a way of synergies. The transaction is ROE accretive and EPS accretive in year 2. I've always mentioned that any transaction that we do has to be earnings accretive year 2, maximum year 3. I'm happy to state that in year 2 itself, this asset becomes earnings accretive to us. From a financing standpoint, I've mentioned, as you know, that we have a large organic expansion plan for our hospitals. In Malaysia, we are growing our capacity by 40%. As a group, we are building over 4,000 beds in the next 4 to 5 years. And most of those -- most of that funding I've stated again in the past will come from free cash flows that will -- we generate from our businesses. So for this specific acquisition, we will look at some of the free cash flows and also probably look at some debt. Again, I would like to reemphasize the fact that none of the brownfield expansions will get impacted because of this acquisition. We have enough capital to do both. With that, I'll probably hand over to Dr. Prem to take us through the strategic rationale of the transaction as well.

Thank you, Dilip. Good evening, everyone. Island Hospital is not an unknown facility. I'm sure many of you know this hospital very well, right? It is a high-quality, very attractive hospital in the North, both in terms of operations and in terms of clinical capabilities, it is ACHS accredited. In fact, they have 2 centers, 2 centers of excellence, Oncology and Cardiology, right. That is specifically ACHS accredited, very strong outcomes. So it's a high-quality asset, right? It is located in Penang, which is a very, very popular destination for medical travel. It's a fast-growing market. We are already quite strong in Penang and even North in particular, if you include our Singapore Bethany Hospitals as well, right? And this will definitely add on to our leadership position, not Malaysia. There's also considerable scope for expansion, as Dilip has mentioned, this land -- they've built new wing, which can grow as well. So it will really be creating a medical travel powerhouse, I would say, to support the country's aspirations. Malaysia, as you will see later in one of the slides, right, it's already a very attractive destination for Indonesia patients, right. I think it also demonstrates that in our home markets in Malaysia it is one of them. We have got aspirations to grow our business. We have done some tactical acquisitions in recent times, Timberland being the most recent one, right? But this is a strategic acquisition, right, that I think will really strengthen our home market of Malaysia, right? We've done some successful M&As in the recent past. You would know about it, Prince Court Medical Center in Timberland, right. There's also going to be quite a lot of value created through the synergies that we have, right? Gleneagles Penang is not very far from Island. Gleneagles Penang is very strong in the local market. It's operating at a very high capacity at the moment. No scope for expansion at all, right? So we will drive considerable synergies estimated at more than $200 million over the next 5 years. And I think this will create considerable value for our shareholders. And finally, as Dilip said, this is going to be EPS and ROE accretive in year 2. So all in all, I think this made a lot of strategic sense for IHH. Going to the next slide. So I mentioned some of these points, very strong asset, right? 500 operational beds now. They've got 600, it's already built at the moment, centers of excellence in various specialties, ACHS accredited. You can see the numbers there, 430,000 outpatient visits, 42,000 inpatient visits, average bill size, MYR 12,000, right? We've got 120 specialists, subspecialists. Majority of them are resident. Some of them are distinct specialists as well, right? So we provide various subspecialties that complement Penang. So if you look at some of the specialties here that they are strong in as compared to Gleneagles Penang, which is very strong in the neurosciences, Island may not have such great capabilities in the area, but they are very strong in oncology, orthopedics, right, all the surgical disciplines. So very complementary between the 2 of them, right. Next slide. I think this will be familiar to you. This is Penang Island, right, where 2 of these hospitals are close proximity, not forgetting we have Pantai Penang, right, which is in Bayan Lepas, slightly distant from these 2, but which is now undergoing a major refurbishment and capacity expansion as well. So I think this, together with our 2 [indiscernible] Bethany Hospitals will ensure that in North Malaysia, right, we are poised for even more growth, and we continue to be a leading medical tourism player as well. Penang is, by the way, just for everybody's information, our second biggest cluster after [indiscernible]. So if you look at this slide, you will see that Malaysia is rapidly becoming a preferred destination for medical travel, right? In fact, it is for the Indonesian health tourists. It is the first top country, right? And what will this acquisition do? It will ensure that more than 1 in 3 of medical tourists coming from Indonesia, will come into the IHH Network of Hospitals in Malaysia, right? And the Malaysia's tourism, medical travel revenues will more than double, right. On this slide, I just wanted to put -- many of you know, Island quite well, I'm sure. But this picture shows you the depth and breadth of this hospital, right? The 2 wings that we have now connected by a very, very innovative tunnel, right, that almost make movement between the 2 wings quite seamless, right? You will also see the piece of land that we have that can be redeveloped further, right, essentially developing a major medical campus up north. Our synergies, there will be definitely from this transaction, 2 types of synergies, right? While it's always easy to talk about cost synergies because we will have savings from buying in larger quantities, all right, group procurement process optimization. But I think we also need to look at growth, revenue synergies, all right. And one of the -- I think if you look at Island, all right, I think the ability to attract medical travelers from the region is very strong. And certainly, IHH hospitals, I think, can leverage on this as well, right, to expand medical travel to the rest of the country as well. So I think these are the quick snapshots that I have. There are some slides in the appendix that you can take a look at, right? But I think maybe better if we were to take questions from the large group of few who are here. Thank you very much.

So thank you, Dr. Prem. So with that, we'd like to start with the Q&A. [Operator Instructions] Yes, then we have Huan Wen.

I have a question about cross-selling opportunities Yes. I mean, I think we understand the Island Hospital is a medical tourist powerhouse. I presume that part of the reason for this acquisition is trying to attract medical tourists to other hospitals in IHH's portfolio in Malaysia. What kind of cross-selling opportunities will there be? And any sort of -- how should we think about volumes of medical tourist there?

See, even before the Island acquisition, if you look at our latest results, you will notice that IHH hospitals alone, the foreign patients have gone up by 50%. So what this shows is that Malaysia is attracting a lot of medical travelers, right? And so IHH is benefiting from that as well. As you rightly say, Island Hospital is a powerhouse. They have finest the -- seeing of medical patients in a big way, right? If you visit the hospital, you will see how they do it, right? It's really a very, very good process that they have worked on. They are marketing, they are regional offices and all that. So I think they have really worked it down to a fantastic science and art in terms of doing that. Our hospitals -- our current hospitals will also grow as well. But I think what putting both together is really leveraging on the expertise that Island has. I'm sure our hospitals will benefit as well. There will be cost coverage, cost referrals as well. So I think that's what we are actually hoping for.

Thank you, Dr. Prem. Next question is from Nicole.

Okay. Actually, my question is more with regards to, I guess, the valuations that you're paying. And I know that you mentioned that if we were to strip out the land -- the vacant land on the site, it is valued at about 19x EV EBITDA, but you are trading at about 13x EV EBITDA at this point in time. And also, I think, Dilip, you mentioned just now that there's a growth momentum of about 45% going from 2023 to 2024, and I think you hope to sustain the similar kind of growth momentum going to 2025. So I guess my question is really if you could help us understand, what drove that 45% increase in EBITDA '23 to '24? And I guess, what would be the drivers for the -- the sustained growth momentum that you see that would help drive a similar sort of growth rate going forward?

Sure. So if you look at the Island Hospital in terms of growth, I did mention that they've grown at 45% over last year this year. And looking at momentum, I would be fairly comfortable to say that they will grow upwards of 20% at least in terms of EBITDA. So that -- a big part of that growth would be sustained. Where does the growth come from? A large part of the growth has come from, a, volume growth. As you can see, they've ramped up from 200-odd beds to close to 500 beds, right? And we still have a -- and they are still operating at about 50-odd percent, 55%. So we still have beds to fill, and we still have the ability to ramp up volume. That's number one. Number two, if you also look at some of the medical program, whether it is oncology, or whether it is cardiology, they have substantially ramped up the medical program as well. So the intensity has also grown like wise. So both this put together, I think sustaining a 20-plus percent growth is something which is quite achievable to our mind.

Yes, I think just also to add a couple of points here. One, obviously, is on growth within Island itself. And I think while they've added a number of beds, our existing hospitals at Penang are also running at quite high capacity. So there is that opportunity to make sure that the growth momentum continues in 2025. That's the first point. I think the -- the second point, and I think Dilip went through this earlier, when you're looking at -- obviously, you look at valuation in multiple ways, primary methodology is discounted cash flow because we are a long-term strategic operator. So what does it make sense for us in terms of the long-term from a valuation point of view. And even if you're looking and trying to get your thoughts around the multiples, initially, we talked about value of the land, value of the synergies. And then finally, I think the last point is that we -- most of you, most of the analysts look at us, they look at us in terms of sum of parts valuation where different markets have different value. And I'm sure the Malaysian multiple is much higher than where we are trading on a sum of parts basis.

Sorry, just -- can I just -- just a follow-up question. So I think, Dilip, you mentioned that with the medical programs that we put in place, the intensity has actually grown. And I see that have an average revenue per inpatient of about MYR 12,000 for Ireland. Maybe what was it, I guess, in 2022, if you can give us that number?

Sure. So look, suffice to say that if you see our Malaysian network, IHH's Malaysian network, you -- we've spoken about this in the past, where we've said, look, we've had high single-digit growth in terms of intensity. That is true for Island as well. Suffice to say that we do see high single-digit growth on intensity as well. And that momentum, hopefully, should continue as we've seen in rest of Malaysia.

Next question is from [indiscernible].

Just have probably something to look forward to, I guess, just wondering whether there's any rush for you guys. Of course, now it's in the early days and whether there's any rush for you to open up to 600 beds, if there's any time line to hit this 600 beds maximum capacity? And just wondering, as you mentioned, minimal CapEx should bring you there. So just wondering if you have any kind of CapEx number in mind with regards to lease expansion.

So Island is -- I mean, it's quite amazing facility I would tell you, right? If you guys were visited. This is not a facility where owners have changed on CapEx. They are very, very well resourced. They've got 2 LINAC's. They've got 3 MRIs, they put 2 CTs, they've got HCTs. The facility is very well maintained. They built the extension during COVID, right. And so if you go to that facility, you'll see it's very good. We don't really have to spend too much money on this facility for sure, all right? That's -- so I would say that. So I think we are quite confident, right, that this -- now why 600 beds? We never -- in an extension, we will never put in just the number of bids that we need to, right? So you always build so that you have got growth. And if you look at Island's growth and what we project, I think it's only a matter of time before the 600 beds are filled up. We also were telling you that Gleneagles is full, absolutely full, no capacity for expansion, right? So I think what this is going to do together with our Pantai Penang expansion is to -- I think we'll have close to 1,000 beds in Penang -- yes, more than 1,000 beds, right? So that will easily make us the dominant player for -- as we grow the business.

Just to clarify, so this expansion to 600 beds is not even on to the vacant land around, right? So there is actually more room? More and more.

Yes. This existing big capacity.

Yes. This is what we said earlier, I think when you refer to our presentation slide, which Dr. Prem showed earlier, there are additional 3 others plots that gives us additional opportunity to expand. And so I think that's where we talked about the valuable land bank that's available there, which is very scarce if you're aware in Penang Island. So this is indeed a rare commodity for us, and this is, like I said, the upside with it.

Very little or no CapEx is required to scale up to 600 beds.

Next question is from Pooja.

So I understand that Penang is a good land parcels with high medical tourism. I just wanted to understand why the occupancy levels are at 55% right now if it's such a good asset versus the other existing hospital of IHH Gleneagles Penang, almost running at full capacity? That's my first question.

So I think 2 or 3 points here, Pooja, one is, obviously, the capacity ramp-up has been quite a lot over the last 12 to 18 months. Second, you've got to look at this as it attracts large number of medical tourists. So the capacity actually varies during the week to some extent. So you've got very high-capacity utilization on Tuesday, Wednesday, Thursday patients come in, especially the international patients coming on Monday. And then over the weekend, it's lower. So that's one aspect. The second aspect is that for us, this means there is a very attractive growth opportunity. Like you said, some of our hospitals are already running at full capacity. So I think for us, it is a very good structure currently in place because we can extract the best out of some of the days during the week, but also look at filling those extra beds through the IHH network.

And maybe just to add, Pooja, if you look at 2, 3 years back to now, they've almost ramped up 200 beds. That's a lot in 2 years' time, if you know what I mean, right? So any hospital that -- and you will appreciate that any hospital that's on ramp-up phase typically has about 50% to 60%. As and when you hit a 60% mark, you open a fresh ward, right, to ensure that we're able to cater to the peak load during the week. So I think that is something that we need to keep in mind. So this actually, we see as a great opportunity going forward.

In fact, what I anticipate, if you look at the proximity of the 2 hospitals, I think there is just a stone throw away from each other I think there are days when Gleneagles Penang is extremely full, and I think this provides us now with an opportunity to detent some of the patients from Gleneagles Penang and you never know where we are losing patients. If you have no beds means, the patient goes to another hospital, right? I think so there is an opportunity for us really to detent patients to Island.

That's helpful. If I may, I have another question on valuation. I understand that we've done a DCF, but for the valuation multiple, what are the benchmark hospitals considered what justifies these [indiscernible] that we have given?

So I think, Pooja we -- so I just -- I just mentioned for us, long-term strategic operator, DCF makes more sense. But we do look at comps. And if you look through a lot of the transactions that have been done in Malaysia, having most of the possibly analysts on the call will be familiar with this, these numbers. Ramsay Sime Darby was on, that was done recently. It was 20.1x, I think Colombia Asia was close to 24x, prince Court Medical Center was done at 21.9x. So there are a fair number of transactions in Malaysia itself, which are probably the most relevant for us to look at in terms of direct comps.

And maybe just to add, Pooja, if you look at trading comps as well, right? And if you look at -- and as Ashok mentioned previously, if you look at specific Malaysian place or specific trading multiples for Malaysian listed companies. And if you were to look at even some of the parts that analysts have ascribed to our Malaysian business. It is in the range of somewhere between 17 to 19x. So again, it is pretty much in the ballpark of our trading multiple as well. Should we, in the future, look at listing Malaysia alone. So I think it's pretty competitive and comparable.

And I think just going back to the -- so we are talking about 2024, but I think what we highlighted earlier as well, there is a land parcel that is valued. There are clear synergy that we have outlined and highlighted to the analyst and investor community in terms of next 5 years. So when we're having the same conversation same time next year, I think the story and picture is going to look quite different. And I think as you take all these sort of factors in. And like the attractiveness of this asset, while we are looking at a growth opportunity, what we're also very clear that the ecosystem they bring in, in terms of medical tourism that provides a very unique opportunity for IHH itself, given our network in Malaysia. Malaysia is one of the largest destinations of medical tourism.

And maybe just to draw parallel, and I think this probably may help all of you as well. So when we acquired Prince Court Medical Center in Q3 of 2020, just to give you some statistics, right? Their EBITDA margin was at probably 10%. Currently, we have in upwards of 22%, 23%. Number one, right? If you look at the CAGR revenue growth from 2020 to 2023, it's at close to 16% in terms of CAGR revenue growth, right, from Prince Court Medical Center. If you look at the CAGR of EBITDA, it's upwards of 50%, right? So very clearly, it gives us the ability to ramp it up and similar to Prince Court, it also gives us the ability to ramp up and integrate quite nicely with the IHH network.

And let's see if I can maybe add another point to and maybe Dilip, you can elaborate more. I think earlier someone asked about the key drivers of growing this business. I think particularly when we talk about medical tourism powerhouse, the fact that we are getting a lot of Indonesian patients. But I think in one of the slides, we talked about Indonesia patients not just coming from [ Medan ], but increasingly opening that funnel of over 30% that's coming -- also coming from Jakarta, Surabaya and the rest of Indonesia. So I think again supporting Malaysia's medical tourism expiration. So I think this is a very powerful story that we have here.

And look, this is something that the Island team was built over 3 decades. It's not something that was built yesterday or the last couple of years, right? They spent literally 3 decades building this network across Indonesia. So that gives us a huge potential to unlock that not just for Island, but across the IHH network.

Actually I think that's a point worth emphasizing. Penang Hospitals have always been known to attract patients from North Sumatra, right, we done and achieved in particular. But Island is very interesting because 1/3 of its Indonesian patients come from North Sumatra and another 1/3 come from Java, right, which is, by the way, a traditional place for patients coming into Singapore, right? And another 1/3 from the rest of Indonesia, I don't think there's any hospital in Malaysia in the region that has got that sort of attraction across Indonesia. It's quite an amazing statistic.

Thank you, Pooja. Next is Alex. If not, maybe I'll move on. Alex, maybe I'll come back to you again. Maybe Kong Tan.

There are several questions. The first question is that the EBITDA that you've used to derive the EBITDA of 24.6x. Any one-off item inside this EBITDA?

No, no one-off items. These are -- its operational EBITDA. And again, as I mentioned, we have a very clear sight of 2024. And the growth momentum should continue at -- over 20% going into 2025 as well.

Okay. I just want to understand the assessment [indiscernible] investment [indiscernible] EBITDA margin, PAT margin and also the ROE. And also what is your target EBITDA margin, PAT margin and ROE in the coming 2 years, like in 2025 and 2026?

So look, what I can say is it is really comparable to our margin. In fact, it's slightly above our EBITDA margin. And it is -- from an ROE perspective, it again, meets our hurdle rate while we integrated into our overall network. So we're very, very comfortable with both the quality of earnings as well as the sustainability of those earnings.

Yes. I think just in general; we don't look -- we don't give forecasts; we've never done this so far. So no comments on '25 to '26 numbers.

Reminding of forecast, can you give me the latest margin for EBITDA, PAT, the latest one?

Look, suffice to say, as I said, it suffice to say that it is at or above our other assets in Penang. And we believe that the margins can be sustained at those levels going forward as well.

We have console, I think this profitability question, I think we just announced this acquisition. Maybe till the closing, you perhaps can share a little bit more about the [indiscernible].

So my next question will be just the Island Hospital management team, still remain the Island Hospital or you will change a new management team?

No, Island has got a very good management team, right? I think there is some opportunity for us to rationalize right, with our Penang and other hospitals. But our intention is clearly to keep the current management team there.

And also just to add, it is ramping up quite fast, right, which means there is actually -- even if there are FTEs there, we can utilize it across our networks, bear in mind, apart from Island itself our Pantai Hospital Penang also is expanding beds. So we really have the need for the FTEs to kind of grow both the facilities.

Also, I think it's just to be mindful about the fact I think for some actually visited Penang and even Island you noticed that, that's 2 wings. And obviously, they've just built up that new wing, which I think opened up somewhere in November 2022. So obviously, at this present point, it is still very much in the ramp-up state. Of course, I think sometime in 2025, at least it will probably hit the steady state.

One last question here. And what is true, how do you divide the synergy value of $200 million over 5 years Yes, is that $200 million compared to your market cap, like $50 million is the bit small?

Okay. So look, I think what I can tell you is that the $200 million is a number that we have actually worked -- we have a very detailed value creation plan, across all those 4 buckets, right? We have 2 revenue buckets in terms of driving synergies, and we have 2 cost buckets. So -- these are bottom-up plans that we've come up with. We clearly know that this is a $200 million that we can definitely achieve. And bear in mind, this is going to have a positive uplift on the EBITDA over a period of time as well, right? So I think suffice to say that $200 million is something that we are very, very confident to stick our neck outs on. And we -- it's based on a bottom-up plan. It's not a number that we just picked up and giving here, but it's a very, very detailed plan that we have value-based plant that we have actually worked with the teams on the go.

Now I can see Alex.

Yes. I just have a few questions. It's regarding the MYR 223 million, do you have the actual acreage? Just want to find out what is your per square foot basis.

Yes. We do have the actual acreage, actually we'll come back to you.

Maybe let us check and then we will come back to you, maybe before the end of this call.

Yes, that will be wonderful. And also for the first half of this financial year, do you have the numbers for Island Hospitals revenue, EBITDA and net profit?

So I think to your first question, I think it's 120,000 square meter. I think on your second question, I think like Penny mentioned earlier, over the next few days and actually, we should be able to come back to you with this. We've just announced the transaction today, the closing is in October. And I think some of these issues will get addressed when we have some more detailed conversations with all of you.

Okay. And also, what is the currently Island Hospitals net debt, currently?

So if you look at debt, it's mentioned there in the slide, it's about MYR 270 million in terms of debt.

Okay. And what is the percentage of medical tourism that accounts for the revenue for the first half of 2024?

About 60% of the total -- out of the total revenue about 60% roughly is accounts from medical tourism.

Next question, perhaps we can have [indiscernible].

Congratulations on the acquisition. I just noted earlier that you mentioned that your acquisition will basically be funded by a combination of external and internal funds. And I understand the question that I'm asking maybe a bit private at the moment, but would you be able to give us any sort of color on what that composition to be -- would be? That's my first question. And my second one is then post your acquisition, what are you looking at in terms of your retained profits and cash flow after your financing cost? So that's it from me. Yes, happy to hear your thoughts on my queries.

So on the first question, what I can tell you is -- we are -- as you know, we are a cash generative business. We do generate a fair bit of cash. And if you were to just look at our debt across various countries, and I've mentioned this in the past, if you take our total debt or net debt 1/3 of that typically comes from Life Re, another 1/3 are lease liabilities. And the remaining bulk of it is contributed by 2 countries, one is Hong Kong and the other is China, right? So most of our balance sheet across all the other countries are pretty much debt-free at this point in time. So a, we have the ability to leverage while we want to leverage, we should also be conscious of the fact that we utilize our own funds first to reduce any cost of debt, right? So we are looking at it carefully. Suffice to say, leverage would probably be in the order of somewhere between 60% to 70%. The remaining we'll probably fund internally.

Maybe the second one in terms of what's your outlook for your cash flow and your retained profits post-acquisition? Yes.

Sure. So look, the -- from a cash flow perspective as well, we -- as I mentioned the outset, we are a cash-generative business and the entire a 4,000-bed expansion plan that we have for the group is something that our cash flow can very sufficiently fund over the next 4 years' time, right? So given that the leverage that we have here is something that, again, we would be able to service from our Malaysian business itself. So it is not one versus the other, but we can actually do both, both in terms of brownfield expansion using our free cash and the acquisition using debt and service it through the free cash that we generate as well.

And just -- there were some questions around revenue and net profitability. In our Bursa announcement, it is, we've included this on Page 13. So some of those details are available in that document.

Thank you. Next, I will go to Yen.

It's really around the revenue per patient that is about MYR 12,000, that's about 20% above of what IHH Malaysia is having. Now given that Penang Island Hospital is more tailored to medical tourism, this question is, how does that compare to your current existing hospitals that are more medical tourism geared. And then if I will compare this to be [indiscernible] more medical tourist related, they could essentially charge a higher premium. So is this a matter of Island Hospital not having enough equipment, for example? Or is that kept by the mandated doctor fee. I just want to confirm, is that the cap mandated doctor fee for Malaysia is still at 30%.

So if you look at the average inpatient amid revenue at MYR 12,000 that you are talking about, so the Malaysia number that IHH represents has all the clusters in it, right? You have everything starting from Johor to get Klang Valley to even the Northern cluster, right? So it's a mix of all of these and also Tier 1 hospitals and Tier 2 hospitals, right? So the MYR 10,000 is a number that is a combination of all of that. So this clearly Island Hospital, which has MYR 12,000 is fairly comparable to the cluster that we operate in, and we believe that that's a number that is going to sustainable going forward as well.

In fact, in our Q2 numbers we shared recently, our Malaysia averages about MYR 10,700.

Yes.

And typically, foreign patients due to the nature of their conditions, sometimes they take a bit longer. They may have consulted a doctor locally and by the time they come to a destination hospital, the bill size tends to be higher simply because of the complexity of the condition. So it's not unusual. And I think that effective of Island's foreign patient numbers.

Okay. So a quick follow-up, what potential upside can we see on the MYR 12,000 number?

So yes. So as I mentioned previously, we've seen -- even if you look at our Q2 numbers, we've shown about roughly 7% intensity growth. I think intensity growth is something that will continue to happen, right, mainly because of the fact that; a, we are seeing more complex cases, and we are actually investing in some of the -- what do you call medical equipment and in terms of clinical talent, that is able to do some of the more complex procedures. Again, for example, if you look at Malaysia, Malaysia is focused on emergency medicine over the last few years, and we can already see that paying off as well across our network. So I think the intensity is something that we would continue to see in terms of growth, mainly driven by higher acuity patients coming to us.

Yes. I think we've mentioned this in Page 4 as well. This is a very attractive asset with great clinical capabilities. There were 9 COEs and 2 that are ACHS accredited. So we will continue to see some high-quality work being done through these hospitals.

Sure. And also, if I can point you to Slide #10 where there are 9 COEs and are still expanding also the fact that they have key medical equipment, we have 2 cath labs, LINAC, MRI. So cutting-edge equipment and set to [indiscernible] continues to drive the revenue intensity.

And again, reiterating the fact that there's actually no CapEx that is required to further go into the hospital, we're very happy with the kind of equipment and the kind of quality of equipment that they have already.

Does that answer your question, Yen?

Yes.

Great. Maybe we'll go back to Nicole.

Actually, my question is just around -- I think you mentioned just now that for Island Hospital, they have built this business over 3 decades. They have a very unique composition of Indonesian patients, a 1/3 coming from North Sumatra and 1/3 from Java and the rest of -- another 1/3 coming from the rest of Indonesia. So my question is really what do you think they do -- what is it that they do so well? And I guess, what is it that they do differently from what you do in trying to attract the Indonesian patients? I mean hardware side -- is it that they have a stronger network? Or what is it that they do?

So I think there are a number of things that differentiates hospitals attending mainly to local patients and those attaining to foreign patients, right? I think Island Hospital started in a era where there were already strong local hospitals. And I think the immediate point [indiscernible] remember, it was a physician-led hospital, right? 11 of them left another hospital in Penang to start this hospital, right? They were the founders. And they had to come up with strategies to fill the hospital, right? And I think they knew full well that the other hospitals in Penang getting patients coming from Medan. There are similarities between Medan and Penang, right, most notably the Hokkien speaking populations in both places. So I think they decided to go for the foreign market, all right? While the other hospitals in Penang in Malaysia, were focused a lot on the local patients. Now attending to foreign patients means your processors will have to be very different. If you look at the Health Screening Center, it is one that patients can come in the morning, fasted. They do everything, all the test, see the physician, the results come back in the afternoon, and they would see a specialist and that's the point I think that Dilip was trying to make, where a lot of their work happens from Mondays to Fridays and the foreign patients come in, on weekends, it's downtime, patients go back, right? So over the years, they have finest it doctors, right, tuned to it, right? So the process is actually very, very different. And I think that's something that they really have fine-tuned very well, all right? You can see that in the way we operate if you visit the hospital.

We go back to Wee Kuang.

I just wanted to check, I mean, in terms of staffing wise, is there any challenges? Do you see -- do you foresee like given -- I know that resources is something that you can share across the network now? But do you find that you might have challenges to fill out the expanded capacity that you have today?

So we said that we spoke about the specialists, the FG got the largest pool of specialist in Penang, right? So they do have doctors, they've got a very good supporting base of about 800 nurses, right? Total strength is 1,500. So our impression is that it's fairly well resourced at the moment, right? And well, nursing issues, I think it will come up from time to time. That's a worldwide issue and they cope with it, I think, quite well. So no manpower resource issues as far as we are aware of.

Alex, you can unmute and ask the question.

I have just one final question is regarding your foreign tourists. You mentioned it's 60% of revenue. And can you give us the breakdown from which country? I think I know you mentioned Indonesia, about Thailand and the other Southeast Asian countries.

Yes. Look, I think I would say a significant part or probably 90% is from Indonesia. So the -- and the beauty as Dr. Prem mentioned, is Indonesia, it's not just Medan, but it's Medan sort of via Jakarta and beyond, right? So it's fairly well spread across the whole country of Indonesia. 90% of that is all Indonesians in terms of patients.

Thank you, Alex. Maybe Sue, do you want to ask your question?

Yes, can I please. All right. Just if I were to look at your second quarter slide, [ elimination ] EBITDA margin is 25%. If you were to just [indiscernible] look just in the class of Penang Hospitals, is it around that level or higher?

It will be -- so it will be higher. As you know, Penang, the margins are better. So it will be higher in Penang.

Okay. And then the piece of land that comes together with this acquisition, what are your plans for this at the moment, would you be looking at the brownfield expansions for this? Any time frame that we can expect.

[indiscernible] any hurry to plan anything for the land. There is currently enough capacity in the hospital. We'll take it as a very attractive piece of land in the Golden Triangle area of Penang. It's [ Macan ] a very, very great -- good part of Penang, I would say, right? So in no hurry. Yes, we will see the -- once we've take over the hospital, we'll see what we can use the land for.

Right. And maybe the last question is what's your estimated market share and just Penang alone now with other hospitals in terms of dates as well as -- mainly in terms of it?

I don't think we have already answered for that. At some point, we will let you know.

I know we have one question from [indiscernible] is basically can you share the operating steps number of operational beds, occupancy rates, revenue share percentage of medical tourism for your current brand, [indiscernible] Penang and Pantai Penang hospital? Dilip, could you want to take that question.

Sure. So the first question is operating beds. So it's about roughly 300 operating beds in terms of utilization, again, varies from month-to-month, but I can very easily say it's upward to 70% in terms of utilization. Revenue from medical tourism, actually much lower in GPG. GPG is somewhere in the order of about 20% to 30%, again, based on when we look at it. What else?

And her second question is how much more CapEx do you expect if you were to build that 400 beds capacity for Island Hospital?

So yes, I guess it's too early at this point in time. I think we are at 500 beds operating at about 50-odd percent utilization plus we have another 100 bed to go. So I guess the focus would be to now ramp up Island itself to a comparable 70% utilization before we can start thinking about building more at that site at this point in time.

I know we have about 5 minutes left before we need to end the call. Any last burning questions from anyone, and any hands to be raised. If not, maybe...

I've got one. So -- yes. I mean I know this acquisition is not that big, but would you, in any case, have any changes to the dividend policy going forward, assuming you do another more [indiscernible], for example.

So great question. We've been mentioning this to all our investors. The dividend policy last year, it was a conscious call, where we insured -- we did 2 things, right, last year, if you recall; one, we improved our payout ratio to say at least 30%, right? So that's not going to go anywhere. I think that's something -- that's a commitment that we've given to our shareholders, and we'll stick by it. We've also, last year, if you remember, from time to time, we evaluate whether there is excess cash, which cannot be immediately deployed, then we give it back to shareholders in terms of as a special dividend, which we did last time when we sold IMU last year, right? So from a dividend perspective, 30% in dividend policy is something that we will definitely adhere to. I don't think that's going anywhere. And again, time to time, we will look at the cash that we have and see if we do not have a need to deploy it anywhere quickly. That's the other avenue to kind of declare dividends at that point in time.

I think there's no -- that's the end of the questions. But before we wrap up this call, 1 minute for Dr. Prem sell the story.

Okay. So I think we have -- what we've emphasized is that we have bought a really high-quality hospital, right, in Penang. And in Malaysia, if you ask me, probably in my mind, the last of -- large-format hospital that's available for sale, right, for many years to come. This fits very well into our Northern cluster, Penang northern cluster strategy as well for whole of Malaysia. It provides -- is very complementary to opening hospitals which are predominantly focused on local patients, right? But I do think that this acquisition will transform IHH into a much more medical travel-focused hospital group, right? So I think we wanted to make sure that we'd be able to meet all of you this evening, soon after we did the announcement. And I'm really very glad for the enthusiastic response that I don't know how many of you here, 100, maybe 125 -- 105 of you here, right? I think it's the biggest call that we've ever had for a long time, all right? But very glad thank you for your questions. I'm sure you have many of the carries the days to come, right? And our team stands ready to speak to you all any time. Thank you very much.

All right. Thank you, Dr. Prem. Thank you, Ashok. Before end the call, if you have any questions, feel free to reach back up to the IR team, and you know where to approach me and [indiscernible]. So with that, thank you very much, and have a great evening ahead. Thank you.

Thank you.

Thank you.