Econ Healthcare seeks a relist for China planned expansion; aims to break nursing home taboo
In Asian societies, caring for one’s parents in their old age is of utmost importance. Traditionally, children who are deemed filial are expected to welcome ageing parents into their homes instead of placing them in nursing homes. However, in this fast-paced where families are smaller and couples are busy with work and raising children, would elderly parents, especially those who are also ailing, be better off taken care of by professionals in a nursing home?
According to Ong Chu Poh, founder, executive chairman and group CEO of Econ Healthcare, the largest nursing home operator in Singapore and Malaysia, being filial is giving elderly parents the best care so they can lead meaningful and wholesome lives.
“This is an education process that takes time”, referring to people understanding that nursing homes can provide their elderly parents better care and more,” says Ong.
“I think people are now becoming more accepting of nursing homes. In the past, putting senior parents in nursing homes was taboo in our society and means you are unfilial. But if you don’t have the right resources to take care of your elderly parents and if you constantly leave your parents alone at home while you are at work, is that really being filial?” Ong tells The Edge Singapore in an interview.
The way Ong sees it, Econ’s nursing homes not only provide professional care by doctors and nurses, but the facilities also offer regular social activities to keep their residents active and healthy.
“We are trying to be at the forefront of this kind of care and we will continue to give families the best care they need. However, we do not condone families who treat nursing homes as a place to dump their parents. So far, we hardly see cases like these. The families will frequently come and visit,” adds Wong.
Agreeing, Econ’s executive director and deputy CEO Ong Hui Ming, who also is Ong’s daughter, says, “It is also about creating awareness and understanding in terms of how we approach and support our customers. It is always home first, not nursing home first.”
“It is about understanding our customer’s health and social needs and showing them empathy,” says Hui Ming, adding that Econ also runs training programmes to teach caregivers how to give proper care for the elderly in a home setting. Econ also has therapists to conduct home assessments to ensure that the home is safe and equipped to cater to the elderly’s needs.
“And only if the home environment is not suitable or if the resident demands a higher standard of care, will we then explore a day-care setting or a nursing home environment,” adds Hui Ming.
“The senior care industry is not a sunset industry. It’s not just a nursing home where the elderly wait out their last days. It is an environment where there is full of joy, energy and happiness,” she claims.
Re-emerging stronger
Econ Healthcare was founded by Ong in 1987 and was listed on the Singapore Exchange (SGX) in 2002 before it was delisted in 2012, following a 28 cents per share offer by Ong in conjunction with a Swedish fund EQT Private Equity. At that offer price, Econ was valued at around $80.4 million and at 2.2 times its book value of 12.8 cents.
Ong explains he took Econ private the first time around was to tap EQT’s help in expanding its portfolio in Malaysia. Upon its exit from the Catalist board of SGX, EQT held a 49% stake
in Econ, while Ong held the remaining 51%.
With EQT’s help, Econ managed to open its flagship purpose-built 199-bed nursing home in Taman Perling, Johor Bahru, Malaysia, in 2014. This was Econ’s second nursing home in Malaysia: the first opened in 2004 in Pudu, Kuala Lumpur. Econ also expanded its Singapore presence by adding 90 beds at its Buangkok View home to make it a total of 296 beds and successfully renewed the lease for its Yio Chu Kang home for a further two years.
After a four-year partnership, Ong decided to part ways with EQT as he wanted to expand in China. In 2016, he bought out EQT’s 49% stake, making him the sole owner of the company again.
Today, Econ is the largest private nursing home operator in Singapore and Malaysia. According to statistics from Euromonitor, Econ has a 26.9% market share in Singapore by revenue receipts and a 43.2% market share in Malaysia.
In China, Econ’s first nursing home will be launched sometime this year in Chongqing. “Econ is already the market leader in Singapore and Malaysia. Although the population of aged people is growing in these markets, we still think of the company’s growth and where else can our business be meaningful. I have been frequenting China since 1978 and I have seen how the country has grown. Within the Asia Pacific region, China is the engine of growth and has a large economy. Also, I’ve read several reports saying the ageing sector in China will be the biggest compared to all other industries,” says Goh.
Although Econ’s growth in Singapore and Malaysia has been rather organic and achieved alone, China is a different market altogether. That is why Econ decided to enter into a joint venture with Chongqing Guangda Bailingbang Eldercare Industry for this foray.
“When you enter an overseas market, you are entering into a new culture, new social fabric and a different business environment. So, you need someone familiar with the locals, so that they can guide you along to grow. We did look around for a while for a suitable partner and we finally found an established company who is good in senior care too,” says Goh.
To raise funds for its China expansion, Econ Healthcare plans to list once again. On April 9, it launched its IPO. In conjunction, it will sell 50 million offering shares priced at 28 cents each, to raise net proceeds of some $11.5 million. The offering shares comprise a placement of 48.2 million offering shares and 1.8 million shares for retail investors. DBS Bank is the sponsor, issue manager, underwriter and placement agent for the offering.
Next phases of growth
Despite the Covid-19 pandemic, Econ has managed to remain profitable. In FY2020 ended March 2020, earnings came in at $4.04 million, down from $4.3 million in the preceding year. Gross revenue for FY2020, which included the government grants, was $37.3 million, up 0.8% y-o-y. In 1HFY2021 ended Sept 2020, its topline was $18.6 million and earnings were up 141% y-o-y to $3.65 million, lifted by around $3 million worth of one-off wage subsidies and rental help that were mainly one-off during the Covid period.
Besides fees paid by the residents and the subvention grants, Econ’s revenue includes ancillary fees from its healthcare training services, traditional Chinese medicine (TCM) services at its TCM clinics and the operation of senior activity centres in Singapore.
“In the Singapore market specifically, the government helps to subsidise the residents’ stay in the nursing home. So, the company will collect the subsidised fees from the government while the resident will pay the rest to the company. The subsidy from the government will be parked under the operating subvention grants under our revenue,” explains Econ’s group CFO, Agnes Kang.
According to Ong, since incorporating the company, Econ’s business can be divided into two phases by timeline. The first stage from 1987 to 2020, is the first phase of deployment and “the infant stage of the ageing industry” when the business grew steadily but slowly.
“In 33 years, we achieved a capacity of about 1,000 beds. And when we listed in 2002, we were profitable and issued dividends to our shareholders every year, until we delisted,” adds Ong.
And now, Ong sees that the eldercare market has entered into an accelerated growth stage and the company is in phase two. 2020 was a year of immense growth. The group added some 1,000 beds in one year alone, while previously it took the group about 33 years to add 1,000 beds into their portfolio. The listing is Ong’s way of accelerating its growth.
Looking ahead, the ageing population in Singapore and Malaysia is expected to almost double in 2030 as life expectancy increases and the fertility rate decreases, according to data from Euromonitor.
Econ already plans to establish two more nursing homes in China as part of its JV with Chongqing Guangda Bailingbang. This will add almost 700 more beds to its China portfolio.
As of now, Econ’s goal is to have 2,388 beds by 2025. This figure is based on contracts that will be fulfilled progressively until 2025 but excludes the upcoming two nursing homes that are in the plans.
Econ’s head of development, Xander Ong, who also is Ong’s son, says that technology and digitalisation will be at the forefront of the group’s goal to expand. “Technology is extremely important for us to scale. It does not just help us to scale, but it will also help us in our productivity, allowing us to better personalise the service we deliver,” he says.
In Singapore, Econ is leveraging on the government’s build-own-lease (BOL) projects. In 2014, the Ministry of Health (MOH) announced that it would expand its efforts into the eldercare sector by offering opportunities to market players in the eldercare industry to manage larger nursing home projects involving a “package” of two or more homes on land leased from the government.
Econ was the government’s first appointed private operator to run the Yio Chu Kang BOL project. Last year, Econ was again appointed by the government to operate two upcoming BOL nursing homes in Henderson and Jurong, which are targeted to be operational in 2022 and 2025, respectively. These two nursing homes will see a total bed capacity of 968 beds.