New listing: Pain treatment specialist seeks Catalist IPO to fund expansion
Pain management specialist Singapore Paincare Holdings (SPCH) will be the second company to launch its IPO after Singapore lifted its Covid-19 “circuit breaker” measures on June 2. SPCH launched its IPO on July 13. The company plans to raise gross proceeds of $5.33 million with an all-placement offer of 24.26 million shares at 22 cents each, or 17.74 times FY2019 earnings. As at end December 2019, SPCH’s unaudited net asset value stood at 9.86 cents.
“Our IPO has been 18 months in the making and since the momentum is already there, we want to go through it. Then we can have something to shout about and seal our mark in the industry,” Dr Bernard Lee, CEO of SPCH tells The Edge Singapore in an interview.
The latest IPO comes weeks after Pahang-based iron miner Southern Alliance
Mining became the first to list on June 26. On completion of its listing on the Catalist board, SPCH will have a share capital of 161.6 million units. At its IPO price, the company will have a market value of $35.56 million immediately upon listing.
While Lee remains the largest shareholder, his stake in SPCH will drop to 30.01% upon listing, compared to 35.31% previously. COO Dr Jeffrey Loh will be the second largest shareholder in SPCH with a stake of 17.11%. Two SGX-listed companies, HC Surgical Specialists and Medinex, which provides administrative services for clinics, hold shares in SPCH as well.
The IPO will close at noon on July 21 with trading to start at 9am on July 23. Singapore-based corporate finance advisory firm Novus Corporate Finance is SPCH’s sponsor and issue manager while UOB Kay Hian is its placement agent.
Finding his calling
Incorporated on December 31, 2018, SPCH focuses on treating patients in pain through “minimally invasive procedures, specialised injections, pharmacotherapy and cognitive behavioural therapy”, Lee explains. SPCH also provides primary care and other services such as general medical consultations and dermatology services. These services operate under two specialist clinics — the Singapore Paincare Center and Paincare Center — and four medical clinics: Lian Clinic, Horizon Medical Centre, AE Medical Clinic and New City Skin Clinic.
While the company is relatively young, Lee’s foray into paincare management dates back 24 years to 1996. He was then a trainee anaesthesiologist confronted with a challenge: not being able to relieve the chronic pain his father was experiencing. Despite high doses of morphine and other high-grade painkillers, his father’s pain persisted. “I thought I could control the pain, but I just could not. I was shocked I could not stop it and felt helpless,” he recalls. His father succumbed to the pain and passed away shortly after.
That experience pushed Lee to specialise in pain management, a sub-discipline under anaesthesiology. As a specialist, he looks into pain which is “not so straightforward”. This is because the pain arises from complications, despite the patient having undergone treatment to alleviate it. Using the example of arthritis of the knee, Lee says pain may persist after a patient has gone for a knee replacement surgery due to “referred pain” from other parts of the body such as the back. Lee’s role is to identify this pain source and solve it.
“As a pain specialist, every living fibre of mine wants to solve pain and the problem causing it. My principle is not to touch the patient, unless I can reduce their pain by between 70% to 90%,” asserts Lee, who started his own Pacific Paincare Centre in 2008, before renaming it to Singapore Paincare Center. Shortly after, he realised that many of his patients came with aches that could have been treated at a primary care level. So, he inducted general practitioners and trained them to identify and treat such symptoms. To date, he has six such doctors under his fold, all of whom have experienced “40% to 100% returns in their earnings within a year of training”.
In the most recent 1H2020 ended June, SPCH’s unaudited pro forma earnings rose 85% to $1.14 million from the $616,000 the year before. This was due to a more than doubling in revenue to $5.1 million in 1H2020 from $1.98 million in 1H2019 as well as higher income due to higher uptake of pain management services over the years. In terms of revenue contribution, 40% came from SPCH’s specialist clinics while 60% was from services rendered to the six GP doctors. In terms of treatment type, pain care services contributed the highest income at 83% while the remaining 17% was from minimally-invasive procedures.
An episode to forget
In the prospectus, the company flags that there are certain procedures done mainly by Lee and that accounts for a significant proportion of the revenue. In the event Lee could not perform the procedures and no external substitute found, earnings might be affected.
In March 2018, Lee had performed a procedure to remove a bone spur from a patient suffering from a slipped disc at Parkway East Hospital. However, the electric burr used for the procedure failed midway. Using his better judgement, Lee proceeded without the equipment but was unable to completely remove the bone spur. As a result, the patient suffered a minor tear in the tissue surrounding the spinal cord.
A review was conducted by the hospital’s group medical advisory board and Lee was subsequently suspended from performing procedures at Parkway East Hospital from June 1, 2019, to Aug 31, 2019.
Following the lifting of the suspension, Lee has been able to carry out procedures at Parkway East but procedures rectifying a slipped disc must take place in the presence of an orthopaedic specialist. Lee says the restriction does not apply to other hospitals under the Parkway Group. As a specialist, he says he is “not partisan” to any hospital and performs half of his procedures at Parkway hospitals and the remaining 50% elsewhere such as at Farrer Park Hospital.
Expansion plans
With the incident behind him, Lee says he is looking forward to expand the reach of SPCH. For this, the company has earmarked its $5.3 million gross proceeds from the IPO to further develop its business operations. Specifically, 1.1 million or 20.6% will go towards expanding its range of pain care services to Traditional Chinese Medicine (TCM) practitioners and other non-medical rehabilitative services such as physiotherapy.
“This will help our company to provide a wider spectrum of pain treatments such as rehabilitation, exercise and training programmes,” explains Lee. “We will improve the standard of alternative medicine practitioners by increasing their knowledge and making them a part of our post-care ecosystem”. This means the company will be working with more primary care practitioners.
Given its groundwork in Singapore, Lee believes SPCH has a “plug and play” model that can easily be adopted overseas. With 30% of his clientele coming from abroad, he sees merit in expanding abroad, particularly to Indonesia and Malaysia. The large population in these countries provide untapped opportunities for SPCH to develop and create a strong suite of pain treatment services. To this end, SPCH has set aside $1.4 million or 26.3% of its IPO funds for local and regional expansion. Of the remaining funds, $1 million or 19.5% will go into its working capital while 33.6% or $1.79 million will go towards listing expenses.
Looking ahead, the company intends to distribute dividends of not less than 70% of earnings for FY2020, FY2021 and FY2022, subjected to future financial performance and the distributable reserves.
“This, in turn, is dependent on our ability to implement our future plans, and on regulatory, competitive, technical and other factors such as general economic conditions, demand for and selling prices of our products and services and other factors exclusive to the medical industry,” he adds.
In any case, Lee is looking forward to being a “disruptive force” in the healthcare sector. “We aim to make the SPCH brand synonymous with long-term, sustained pain treatment as well as business and clinical excellence,” he adds.