Lim is believed to have bought a collective 25% stake from Colin Lee and his brother, Lee Soon Swee, in two off-market trades on Tuesday at 52 sen a share for a total of RM77.8 million. It is uncertain where the remaining 4.6% of Lim’s stake came from. Colin will remain as its managing director.
This makes Lim the second largest shareholder after Berjaya Corp Bhd (BCorp) with a 31.66% interest.
At 52 sen, TMC Life Sciences would be valued at RM312.9 million and Lim would be acquiring the Lee brothers’ stake at a price-to-book ratio of 3.1 times, based on the latest net assets per share of 16.67 sen as at March 31, 2010.
TMC Life Sciences’ shares consolidated their recent gains, shedding one sen to 55 sen yesterday after a rally that has seen the price surging some 50% in under two weeks.
It is uncertain as to what value Lim, who is ranked by Forbes as the eighth richest person in Singapore with a net wealth of US$1.6 billion (RM5.06 billion), will bring to TMC Life Sciences. A former remisier, the astute investor is known for picking value buys. His entry into TMC Life Sciences means he sees value in the loss-making company.
From a net profit of RM8.94 million in 2006 and RM9.34 million in 2007, TMC Life Sciences’ net profit fell to RM3.58 million in 2008 and turned into a net loss of RM8.48 million in 2009.
The company continued to be loss-making in the first quarter ended March 31, 2010, posting a net loss of RM2.62 million on revenue of RM12.37 million. The loss was mainly due to its hospital, Tropicana Medical Centre in Kota Damansara, which is presently underutilised.
Analysts had commented that TMC Life Sciences was well known for its fertility treatment business, but the expansion into the hospital business — to make it a major healthcare player — did not pan out financially as it lacked branding and economies of scale.
As a new player in the business, Tropicana Medical Centre had to compete against more established players like KPJ Healthcare, Sunway Medical Centre and Sime Darby Medical Centre.
An analyst said the entry of the new shareholder, provided it is a healthcare player, into TMC Life Sciences could enhance its medical care services, competitiveness and branding.
Lim’s intentions in TMC Life Sciences are not known, but it may be no more than just a passive investment. He obviously sees value in the company, but it is unclear if he will be actively involved in management to add more value.
It is also uncertain if Lim would seek board representation, or if there would be a change in management, although the company maintained that there would be no impact on its operations.
“The transaction will not have any impact on the daily operations of the group, and it is business as usual for the group’s various business segments.
“Further, Datuk Dr Colin Lee remains on the board of directors of TMC Life Sciences Bhd as its managing director, and will continue to practise fertility treatment and obstetrics & gynaecology in Tropicana Medical Centre, the group’s flagship hospital,” it said in a statement yesterday.
The healthcare sector is not new to Lim as TMC Life Sciences is the second healthcare provider he’s added to his list of investments.
On June 7 this year, Lim emerged as a substantial shareholder in Healthway Medical after increasing his stake from 4.96% to 6.03% for S$2.1 million (RM4.89 million).
Analysts in Singapore were positive on his entry into Healthway as Lim is known to be a savvy investor and would subsequently attract more interest to the stock.
Interest among Singaporean investors in the sector has no doubt been piqued by the recent intense tussle for Singapore-listed Parkway Holdings Ltd between Indian and Malaysian giants, a battle which was ultimately won by Malaysia’s Khazanah Nasional.
How active a role Lim intends to play in TMC Life Sciences is still unknown.
If he plays a more active role, one concern is whether Lim would be able to work hand in hand with TMC Life Sciences’ largest shareholder, BCorp, which has largely been a passive investor, leaving the running of the company to Colin Lee and his management team.
Given BCorp’s ongoing strategy to actively unlock the value of its assets, it is uncertain if TMC Life Sciences still fits into this picture, especially with the emergence of the new shareholder.
Should BCorp choose to divest its stake in TMC Life Sciences, would Lim then increase his stake in the company? If Lim, with his excellent investing track record, sees value in TMC Life Sciences, then perhaps that in itself is a message to other shareholders, including BCorp.
However, it is critical to see who will drive TMC Life Sciences, and what its turnaround and value creation plans are. It will be interesting to see if the company turns out to be a good bet for Lim.
Written by Joy Lee
This article appeared in The Edge Financial Daily, August 19, 2010.
It's might appear a tough call given that more established healthcare players are already in place. Given also the fact it is hard to attract or secure dedicated specialists. This area do take time and a unique set of PR exercise, attractive practising rights etc. If at all possible, it would have been done already. But TMC do stands out due to its unique services, multi-discipline specialisations and should further strenghtened those areas with international sygnergies and affiliations. Given that TMC infras are already in place, an indepth and thorough self appraisal across the board including a comprehensive pricing and costs strategies to assess existing and potential areas of development, pricing, products and services that would make its facilities appealing and readily affordable to attract potential patients regionally and internationally. What is the next best thing to do? What it does not have in comparative size, it has the locality, market image and hopefully resources and with existing momentum should maybe focus on identifying niches and build and stregthened friendly alliances from there. Although it may not enjoy comparative Economies of Scales, small biz operations may have lower variable operation costs attachment, fixed setting up costs aside, nevertheless under current market conditions, a biz ROI of 25% is attractive and achievable. With relevant business strategic planning and approach, TMC branding enforcement and market position stregthening, TMC should be able to carve a decent market niche and meaningful share within five years.
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