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ANCHOR REPORT
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Asia Pacific hospitals
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Asia Pacific hospitals 14 June 2018
Contents
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Late 1900s – a shift from multi-bed wards to smaller wards and private rooms
As hospital facilities improved and technological and medical advancements continued,
public hospitals started to get patients from all strata of society, including the affluent.
While the ward design remained the predominant approach, better accommodations
were available for a fee to patients able to afford it. As the need for private rooms in
public hospitals started to be recognised, newer hospitals were built with smaller wards
and more private rooms. This has been increasingly seen in the US, with most of the
new general hospitals being built since the turn of the century, having only private rooms.
While private rooms are still not as ubiquitous in most of Europe, they are available to
patients willing to pay extra for the service. In Asia as well, most of the new private
hospitals are being built with private rooms or two-bedder rooms.
Modern hospitals – focused around surgeries and post-operative care
Most modern hospitals in urban areas are sprawling buildings, where patients go for
consultations with doctors and specialists who diagnose them based on their symptoms.
In this, the specialists are aided by the use of advanced medical technologies, clinical
laboratories and diagnostics. Based on the diagnosis, if a surgery is needed, the patient
is admitted into the hospital for monitoring and treatment before and after the surgery.
For the hospital, the surgery is the most revenue intensive segment of this patient-cycle,
while the least revenue intensive segment is the time spent by the patient in the ward
before and after the surgery. In order to improve their overall revenue intensity, most
hospital operators are focused on doing more complex surgeries while at the same time
trying to reduce the length of stay (LOS) of patients before and after the surgery. Private
hospitals in the Asia-Pacific region, and especially in Singapore, have taken a number of
steps to reduce their LOS including: 1) reducing the number of hospitalisation days prior
to surgery with patients typically admitted on the day of their surgery for most procedures;
2) increasing the proportion of day surgeries including colonoscopy, gastroscopy,
cystoscopy and by increasing the portion of laparoscopic procedures; and 3) reducing
post-operative hospitalisation by keeping patients under observation for a suitable
number of days, after which they are encouraged to return home with regular follow-up
checks done at outpatient clinics. Similarly, medical tourists are encouraged to stay in
hotels near hospitals during their follow-up observation period. These steps have helped
to reduce the private hospitals’ LOS in the region to 3-4 days as compared with 15-20
days in Japan and 4-5 days in the US. However, with the recovery time for patients being
directly linked to the complexity of the surgery, we see limited room for further reduction
in LOS below three days as hospitals try to conduct more complex surgeries.
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Source: Bloomberg consensus forecasts for not-rated stocks, Nomura estimates. Note: Pricing as of 11 June 2018 close.
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Fig. 4: Estimated contributions of select factors in the growth in healthcare spending in the US (1940 – 1990)
(%) Smith, Heffler & Cutler Newhouse
Freeland (2000) (1995) (1992)
Aging of the population 2 2 2
Changes in Third - Party payment 10 13 10
Growth of personal income 11 - 18 5 <23
Prices in the Health Care sector 11 - 22 19 -
Administrative costs 3 - 10 13 -
Defensive medicine and supplier induced demand 0 - 0
Technology - related changes in medical practice 38 - 62 49 >65
Source: US Congressional Budget Office, Nomura research
While the impact of an ageing population looks limited in the US, this was because the
US population aged only gradually during this period. The Congressional Budget Office
(CBO) estimates that the effects of ageing will increase as more of the population
reaches retirement age. Nevertheless, the course of technological innovation is expected
to have a far greater effect on the growth of healthcare costs.
Factors influencing the ability of technological change to impact costs
The ability of a particular technological change to impact costs depends on a number of
factors, including whether the technology:
• Allows treatment for previously untreatable conditions – This tends to increase
overall healthcare costs by bringing treatment options or more aggressive treatments to
patients who would have otherwise not had many options
• Is a substitute for an existing treatment – Such substitutive treatments may actually
reduce the overall healthcare spending in the long run if they are able to substitute for
more expensive current treatments.
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• Extends the life of a patient – This tends to increase overall healthcare costs as the
patient gets additional years of healthcare consumption. On the other hand, the
patients could live the added years with a better quality of life, providing possible cost
savings and social benefits.
• Increases the intensity of use of technology for the same condition – The use of
more technologically advanced products will increase per patient costs but can help to
lower overall healthcare costs if they are targeted towards only those patients who
require such advanced treatments.
• Affects the capacity of the healthcare system to treat more patients – Some
technological innovations could lead to an increased use medical personnel,
consumables and require additional training if they use a new technique while others
may reduce time or personnel. In general, some technological changes may improve
the efficiency of the healthcare system by reducing the number of hospital visits,
procedure time, length of stay for the patient during a hospital visit and thus increase
the capacity of the facility to treat more patients.
Technological advancements can also generate additional demand for healthcare from
patients as well as demand for insurance coverage. This expansion in coverage provides
further incentives for companies to develop new technologies further contributing to a
growth in healthcare costs.
Examples of technology: The CAD cycle
As shown in Fig. 5, there have been a number of significant innovations in the treatment
of coronary artery disease (CAD). These innovations have historically occurred in 10-
year cycles with the PTCA balloon catheters in the 1980s followed by the bare metal
stents in the 1990s, and the drug eluting stents over the past decade. Currently, the
forefront of innovation in catheter-based products are intravenous diagnostics devices
such as intravascular ultrasound (IVUS), optical coherence tomography (OCT), and
fractional flow reserve (FFR), and trans catheter heart valves (THV) for catheter-based
heart valve replacement.
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Catheter products for coronary heart disease become a mature market in roughly 10
years after their launch before giving way to new innovation products. These newer
products are typically more advanced or focused on an unmet need and are thus higher
priced compared to the previous cycle. With replacement demand accounting for more
than 90% of sales, this CAD cycle lends to continued healthcare inflation.
Investments in technology have led to better healthcare outcomes
While medical technology has been shown to be the major driver for healthcare inflation,
it is important to understand if the additional benefits accrued to patients and the
healthcare system at large justifies the increase in costs. In their research paper, ‘The
value of medical spending in the United States, 1960 – 2000’, Cutler et al showed that
average life expectancy in the US increased by 7 years from 1960 to 2000. Half of this
increase, or 3.5 years, was due to improvements in healthcare. According to the
researchers, each year of increased life expectancy cost an average of USD19,900 per
year of life gained. With the value of an additional year of life ranging between
USD50,000-200,000, the study concluded that the increased spending had been a
worthwhile investment, on average.
Fig. 6: IHH hospitals have seen a higher Revenue per inpatient CAGR over FY15~17 as compared to Raffles Hospital
Mounth Elizabeth Novena Mount Elizabeth Raffles
25%
21%
20%
17%
15% 14%
14%
13%
12%12% 12% 12%
12%
11%
10% 10%
10%
7%
7%
6% 6%
5% 5%
5% 5%
3%
2%
2% 2%
1%
1%
0% -2% -3%-5%
URTI
Normal childbirth
Urinary stones
Colonoscopy
Gastroenteritis
Viral illnesses
-5%
-10%
Note: Growth rate is calculated based on the middle bill size. FRS - Female Reproductive System, UT – Urinary tract, URTI – Upper respiratory tract infection, UTI – UT infection.
Source: Ministry of Health, Nomura research
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The Mount Elizabeth Novena (MEN) hospital started operations only in 2012 and was
fully ramped up to its full capacity of 333 beds in 2017. In comparison, the 345-bed
Mount Elizabeth Hospital (MEH) has been operating since 1979. Despite this, the
number of high-revenue-intensive surgeries at MEN has already surpassed that of MEH
in many key surgery types, including for spine, shoulder and fractured joints. We believe
it is largely the higher level of technology present at MEN which allows it to do more
revenue-intensive complex surgeries and to attract medical travellers in need of such
surgeries. On the other hand, according to data from the Singapore Ministry of Health,
the only major revenue-intensive surgery that appears to have been done at the Raffles
Hospital is the surgical removal of benign lesions from the female reproductive system.
Fig. 7: IHH hospitals have conducted more major surgeries during Jul 2016-Jun 2017 as compared to Raffles Hospital
300
250
200
150
100
50
0 Gall Bladder
Prostate
Spine
Sinus
Nose
Breast
Shoulder
Hysterectomy
Spinal body fusion
Tonsillectomy
Knee reconstruction
Fractured joints
Thyroid
In the following sections, we look at some of the technologies, that are already in use in
the US and Europe, which can be applicable for hospitals in the region as they try to
improve patient care, improve their hospital operations and manage the next phase of
evolution.
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Telemedicine vs Telehealth
Although telemedicine is often used interchangeably with telehealth, it is actually a
subset of the latter. While telemedicine refers specifically to the use of medical
information exchanged for the purpose of improving a patient’s health, telehealth refers
to a broader spectrum of remote healthcare services and includes non-clinical services
including continuing medical education, training and administrative meetings.
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Remote patient monitoring (RPM): This enables the monitoring of patients outside
conventional clinical settings through the use of devices which collect medical and vital
signs from the patients. This data can be analysed by doctors and other healthcare
professionals present in a remote location. We discuss RPM systems in more detail
starting from page 15.
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We believe the use of telemedicine to attract medical travellers should benefit hospital
operators who focus on patients with more complex cases such as transplants and
cardiovascular disease. Amongst the companies under our coverage we see this
benefiting IHH Healthcare and Raffles Medical in Singapore who have established
offices across Asia to attract medical travellers to their Singapore hospitals.
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Along with its benefits for patients, RPM systems also help healthcare providers by
increasing the capacity of the healthcare system. With patients no longer required to be
physically present at the healthcare facilities, the use of RPM helps to reduce the strain
on the available healthcare resources. This increases the capacity of the healthcare
system by making it possible to treat more patients effectively. The use of this
technology also allows doctors and nurses to focus their attention on those particular
patients who need additional care rather than on each individual patient. This also allows
the doctor’s to better utilise their time by focusing on other critical tasks.
Fig. 11: Number of remotely monitored patients expected to record a CAGR of 47.9%
(mn units)
60
50
40
30
20
10
0
2015 2016 2017 2018 2019 2020 2021
Source: Berg Insight, Nomura research
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Along with the right technology platform with which to record and analyse the relevant
data, we believe an effective RPM system also needs to:
• Focus on patients who can understand the technology and adhere to its
demands: Low patient adherence is the biggest operational challenge to successfully
launching and running an RPM system. Thus, healthcare operators needs to focus on
patients who understand the needs of the RPM system and are motivated to ensure
better compliance with the system by adhering to its demands and requirements. As
RPM systems move towards more automated data collections thought connected
medical devices and through the increasing use of wearable devices, we expect
improved patient adherence.
• Focus on the right patient condition and affliction: Most current systems try to
focus on multiple chronic patient conditions including asthma, congestive heart failure
(CHF), chronic obstructive pulmonary disease (COPD) and diabetes. However, most
RPM systems are not capable of tracking relevant data across multiple conditions. The
more data the patient has to enter, the less likely they are to adhere to it. Studies have
shown that COPD and CHF are the conditions most linked to readmissions and the
need for emergency care and are thus the best suited for RPM systems.
• Focus on the appropriate metrics that map the systems objectives: The success
of the RPM system is based on tracking certain pre-decided metrics. These target
metrics used should be directly attributable to the performance of the program,
correspond to the goals of the healthcare operator and should be easy to track.
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Another key segment where we expect wearable devices to play a key role is in elderly
care and assisted living. The use of wearable devices can allow for remote patient
monitoring by providing real-time updates on the patients’ vital signs, and signal care-
givers in case of any irregularities. For example ECG necklaces worn by patients monitor
and record the heart rate and ECG (electrocardiography) of the patients. Any
irregularities can be flagged to the doctors while any sudden change can be analysed
and treated simultaneously. As the population in the region ages, we see healthcare
providers trying to manage rising costs through the use of wearable devices.
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• Less pain and discomfort: With smaller incisions, the post-operative pain and
discomfort is also significantly less in the case of robotic surgery.
• Faster recovery time leading to shorter hospitalisation: Robotic surgery results in a
significantly faster recovery time for patients resulting in a shorter hospitalisation stay.
Most patients need only 1-2 days of inpatient hospital stay, followed by 2-3 weeks of
recovery at home.
• Reduced infections: The small incisions also reduce the risk of infections for the
patients and the hospital staff.
Furthermore, robotic surgery provides a number of key advantages for the surgeons
including: 1) better visualisation of the target area due to the high resolution camera; 2)
greater precision due to the instruments attached to the robots; and 3) enhanced
dexterity.
Cost-benefit analysis of robotic surgery still remains inconclusive
Given the higher cost of robotic surgery, there have been a number of studies comparing
its cost-benefit analysis versus open and conventional laparoscopic surgeries.
Researchers at the University of Stanford conducted an analysis with 24,000 kidney
cancer patients who needed laparoscopic surgery. They analysed data from 416
hospitals over 2003 to 2015, and found that there was no statistically significant
difference in outcomes or length of stay between robotic assisted and conventional
laparoscopic surgery, while the robotic surgery cost on average USD2,700 more per
patient.
Mazor Robotics, a company that makes robotic guidance systems for spine and brain
surgeries, recently conducted a study on the use of robotic-guided spine surgery in 379
patients. The data showed that the relative risk of complication was 5.3 times higher in
fluoro-guided surgeries as compared with robotic guidance and the relative risk of
revision surgery was 7.1-times for fluoro-guided surgeries. The study also showed a 78%
decrease in radiation exposure in the robotic surgeries. We expect that as newer and
more technologically improved robots are developed, the benefits of this technology will
become more apparent.
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Over 800,000 procedures annually; growth driven by China, Japan and Korea
As shown in Fig. 15, the number of robotic surgeries worldwide has risen sharply at a
CAGR of 30% over 2006-16. The most common procedures include Gynaecology,
accounting for over 30% of 2017 da Vinci procedures; Urology accounting for around
30% of 2017 da Vinci procedures; and General Surgery, accounting for over 30% of
2017 da Vinci procedures. Overall procedures grew 16% in 2017 and Intuitive Surgical
expects 12-15% y-y growth in 2018F or nearly 1mn procedures. The US remains the
largest market, and accounts for nearly 75% of the total global procedures. However,
growth in procedures in the US has been overshadowed by Asian countries, driven by
China, Japan and Korea.
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Asia – high entry costs should help early adopters like IHH, BH and BDMS
While Asia is expected to be a major growth driver for surgical robots, we believe the
high capital cost will remain a hurdle for many private hospital operators resulting in a
significant barrier to entry. We believe this should help early adopters like IHH
Healthcare, which uses the da Vinci Si surgical system and the Makoplasty robotic
system for partial knee replacements at its hospitals to attract patients, both local and
medical travellers. In Thailand, robotic surgery is also available at top-tier hospitals such
as BH and BDMS, which tend to have the widest range of robotic procedures offered
including Da Vinci robot (for urology disease treatment), Makoplasty (for joint
replacement), and robot-assisted spine surgery.
Along with the high capital cost, surgeries conducted through robots also typically cost
USD700-3,500 per procedure higher than regular laparoscopic procedures, due to the
usage of disposable instruments. We expect that hospitals who invest in robotic
surgeries will be able to pass on the higher costs to their patients and thus benefit from
the higher revenue intensity. Moreover, for healthcare operators like IHH Healthcare in
Singapore, and BH and BDMS in Thailand, who do not employ their own doctors, we
believe that the availability of robotic surgery will also help them attract doctors who are
proficient in such surgeries but may not be able to afford their own surgical robots.
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The use of a 3D printed model ahead of the actual surgical procedure provides a number
of benefits for both the surgeons and the patients. Surgeons can use a 3D model of the
patient to plan ahead of time and practice complex procedures in order to eliminate
errors during the actual procedure. The 3D model can be used to explain the procedure
and discuss treatment options with the patients. Moreover, practicing on the 3D model
ahead of time can also help to reduce the amount of time spent conducting the
procedure as the surgeon will be more familiar with the patient’s body and know what to
expect. This can also help to reduce and rectify any complications that may arise during
the surgery. Overall, we believe that the use of 3D printing can help to improve the
success rate of complicated and high-risk procedures – including cardiac, orthopaedic,
vascular, neurosurgical and hepatobiliary procedures – and improve the quality of care of
the patients.
3D printing is also being used to create prosthetics and medical devices
3D printing is also increasingly being used in the creation of prosthetics and medical
devices for patients due to three major advantages:
• Its ability to be customised according to the patients’ needs: 3D printing can help
to customise joint replacement surgeries by designing a specific replacement rather
than trying to fit an off-the-shelf product. This can lead to faster recovery times and
improve the functionality of the patient after the procedure. Similarly, medical devices
such as hearing aids can be customised according to the patient’s inner ear and help to
provide better comfort and fit.
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• Shorter turnaround time: 3D printed prosthetics and medical devices can also be
created much faster within 2-3 days for low-volume products, as compared with 4-6
weeks taken to manufacture a device made of aluminium. Similarly, dental implants can
be made within a day using 3D printing as compared with 1-2 weeks required earlier.
• Lower cost: Printing a prosthetic is much cheaper than constructing a prosthetic. This
can be especially beneficial for patients who outgrow their prosthesis quickly, such as
children.
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Urgent care
Moderate Moderate -
centers
Robotic
Cyberdyne
nursing Moderate Low
Riken
assistants
Automated
inventory Moderate Low GE Healthcare
management
Electronic bed
Moderate Low -
movers
Source: Nomura research
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Remote ICUs associated with significant reduction in ICU mortality and LOS
While the impact of Remote ICUs varies from case to case, studies have shown that
remote ICUs lead to a significant decrease in ICU mortality and in hospital mortality. In
2011, the Journal of American Medical Association (JAMA) published a study conducted
at the University of Massachusetts Memorial Medical Centre. For the study, healthcare
professionals working remotely monitored 6,290 patients at the hospital’s ICU. The study
showed that the ICU mortality rate declined from 10.7% to 8.6% when they were
monitored by remote ICUs.
Similarly, studies have also shown that the use of remote ICUs can lead to reduced
length of stay (LOS) in the ICU, although there is not enough evidence to suggest
reduced LOS in the hospital for the patient. We believe that the lower LOS in the ICU is
directly tied to the reduced ICU complication rates, due to the presence of remote
intensivists throughout the day and night. Data from the JAMA study mentioned above
also show that the average LOS for patients in the ICU reduced from 6.4 days to 4.5
days.
Remote ICUs also provide a number of other internal and external benefits for healthcare
operators including: 1) efficient delivery of care as time and resources of the physicians
and nurses can be spent on primary care of the patients; 2) improved productivity of
clinical staff; 3) increased perception of quality of care by patients and families; and 4)
higher revenue intensity due to the additional costs for remote ICU monitoring.
High upfront cost is a challenge but is balanced by rapid payback
One of the biggest challenges for healthcare operators in adopting a remote ICU is the
significant capital cost coupled with high annual operating and maintenance charges.
Studies show that setting up a command centre can cost over USD2mn with operating
costs of over USD0.5mn annually. On the other hand, hospitals in the US that have been
able to make such investments have seen a short payback period of 1-2 years. Case in
point, the remote ICU system at the University of Massachusetts Memorial Medical
Centre cost over USD7mn and was paid back in full in approximately one year. Going
forward, we believe smaller hospitals will also be able to outsource their remote ICU
needs, and pay only an annual contract or fees per ICU patient.
The other major challenge that hospital operators can face is ensuring that doctors and
nurses physically present at the ICU understand and accept the role of the intensivists at
the remote ICU. Rather than replacing the nurses and doctors on the floor, the remote
ICU provides a supportive role and improves safety for patients through redundancy. The
intensivists at the remote ICU have an overview of the patients, and can thus help the
floor staff in treating the patients.
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Within the Asia Pacific region, we expect healthcare operators who invest in remote
ICUs to benefit from the shorter LOS for patients in ICUs, thus helping them to increase
the bed turnover rate. We believe this will result in two key benefits for hospitals: 1) it will
increase the revenue intensity of the hospital as it can help it attract higher-risk patients
and doctors performing high-risk surgeries, which are more likely to result in the patient
initially recovering in the ICU; and 2) the shorter LOS could in fact lower the cost per
patient for insurance companies. As private insurance coverage increases in the region,
we believe the availability of remote ICUs could increase the likelihood of coverage by
insurance companies.
Large hospital operators such as IHH Healthcare best placed to invest in remote
ICUs
Despite its benefits for patients, insurance companies and hospital operators, we believe
the high capital cost for setting up remote ICUs could be a stumbling block for most
hospital operators in the region. Given this, we believe that remote ICUs could emerge
as a source of differentiation and branding for hospital operators in the region. In
Singapore, we expect IHH Healthcare as best placed to invest in this technology. With
four hospitals in the country with a combined bed capacity of ~1,000 beds, we believe
the company can consolidate its remote ICU operations to serve all hospitals, thereby
reducing its payback period. Given Singapore’s proximity to Malaysia, the company can
also set up a consolidated remote ICU for its hospitals in both the regions.
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Monitors Radiation
shielding
Fixed C-arm is the most preferred imaging system for hybrid ORs
Selection of the type of imaging system is one of the most important decisions when
planning a hybrid OR, with the most widely preferred imaging system being a fixed C-
arm. While the use of mobile C-arms would save space, they also have a number of
disadvantages including lower image quality, overheating which prevents their use in
longer or multiple surgeries and a smaller field of view. Fixed C-arms are generally
mounted either on the floor or the ceiling. Ceiling-mounted systems require ceiling space
and reduce the options for installing surgical lights and they can also bump into the
anaesthesia equipment when being moved. However, they are still preferred by many
hospitals as they can cover the entire patient body without moving the table and with
more flexibility.
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The type of operating table is determined by the primary use of the Hybrid OR
Along with the choice of imaging systems, the other major decision while planning a
hybrid OR is the selection of the OR table, which is generally dependent on the primary
use of the hybrid OR. Interventional tables have a floating table-top to allow fast and
precise movements, while cardiac and vascular surgeons have less need for complex
positioning. Generally, the table is a compromise between the interventional and surgical
requirements such as a floating table specifically made for surgery, with vertical and
lateral tilts. Side rails can also be added for mounting surgical equipment like retractors
or limb holders.
Other important characteristics to be considered include the position of the surgical bed
in the OR, its compatibility and integration with the imaging devices with the operating
table, the table load, adjustable height and horizontal mobility. It is also essential to have
the proper accessories available, such as rails for mounting special surgical equipment
and a camera holder.
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OR equipment
$0.4mn Imaging
equipment
$2mn
Construction
$1mn
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Source: ‘Models of Care for High-Need, High-Cost Patients: An Evidence Synthesis’, D. McCarthy et al (The
Commonwealth Fund), Nomura research
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One of the first such programs was started in 2009 by Boeing, which partnered with the
Pacific Business Group on Health (PBGH) on a pilot program which included about 700
people. This was followed by similar pilot projects by the California Public Employees
Retirement Scheme and the Pacific Gas & Electric Company. In 2013, PBGH received a
USD19.1mn grant from the Centers for Medicare and Medicaid Services (CMS), which
allowed it to expand its program to serve 15,000 participants across the US. An analysis
conducted by PBGH over a 30-month period for the CMS-funded program showed a
21% reduction in the cost of care for high-risk patients who had been enrolled for at least
nine months.
Dedicated care coordinators are an essential component of IOCPs
An essential component of the IOCPs is dedicated care coordinators who are embedded
with primary care physicians or medical groups. These coordinators are often nurses or
community health workers and medical assistants and must be able to rely on medical
supervision from the primary care provider or another physician. After the patients are
enrolled in the system, a care coordinator meets them to review their medical history and
to develop a plan for their treatment. The coordinator and the patient interact regularly to
build an ongoing relationship with the patients and work closely with them over time.
These coordinators also introduce the patients to relevant support services including
behavioural health and home health. In case of any need, the patients have access to
non-emergency department care providers at any time with follow-up with the care
coordinator.
Financing and identification of patients remains major challenges
Implementing an IOCP program requires investment in training staff, creating an
infrastructure for easy access to patient data and providing access to non-emergency
department care. However, this initial investment is expected to be offset by long-term
reductions in overall spending for medically complex patients. The other major challenge
is correctly identifying and assigning patients to the IOCPs. Some of the methods used
to identify patients include: 1) direct referrals from the primary care physicians; 2) use of
hospital records to identify patients; and 3) using analytic techniques including risk
stratification to identify such patients. After the patients have been identified, they must
be assessed by the care coordinators to ensure that they will benefit from the IOCP.
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Robot assistants help nurses devote more attention to critical patient services
The robotic nursing assistants currently being developed are autonomous, agile, highly
mobile and stable with the ability to self-navigate. These robotic assistants can perform
routine patient surveillance, patient care and support tasks, allowing nurses to devote
extra attention to more critical services for patients. These robotic assistants can also
enhance the ability of nurses to detect potential patient problems and complications early
and prevent small problems from escalating further.
In a hospital, robotic assistants can be made to visit each patient room on preassigned
rounds to monitor patients for any alerts while ensuring medication compliance. This can
allow the nurses to focus on administrative functions and patient compliance, thus
helping the hospital yield healthcare savings, result in greater patient compliance, reduce
errors due to fatigue and distractions, leading to better patient care. These assistants
can also be used at home or assisted living facilities for elderly patients or patients with
chronic conditions.
Robotic nursing assistants can also be used by physicians and nurses to remotely
communicate with patients through audio / video interface. This can be especially useful
during outbreaks of contagious diseases or when patients are in quarantine. Use of the
robots can reduce the risk of infection for nurses and other hospital staff, prevent the
handling of contaminated materials and minimise exposure to contagions and other
biohazards.
Robotic exoskeletons to help nurses lift patients easily
Another major technological development for nurses is the creation of robotic
exoskeletons for nurses to allow them to lift patients without injuring their backs. Studies
have shown that in Britain’s National Health Services over 80,000 nurses injure their
backs at work annually with 3,600 nurses forced to retire early. To address this issue
companies are developing robotic devices that strap onto the wear’s limbs and helps
them to lift heavy objects including patients.
The robotic exoskeleton generally contains sensor pads that calculate how much force is
needed to pick up patients. As the nurse lifts the patient, she is aided in this process by
the robotic exoskeleton, which provides support and reduces the actual effort she has to
make to lift the patient. This reduces the stress on the nurse and prevents back injuries
and other muscular skeletal injuries.
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Data collected can be used to forecast demand more effectively and further reduce
costs
The drug and device data collected by the automated inventory management systems
can be analysed to better understand the inventory use, maintenance needs and waste.
This can allow hospital operators to forecast demand more accurately and modify the
minimum acceptable inventory levels for each item. This can further reduce costs
associated with unnecessary stocking. This data can also be used by hospitals to
schedule maintenance activities and anticipate when new drugs or devices will be
available.
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Electrical hospital bed movers are generally small and compact to allow them to fit inside
elevators along with the beds and for increased manoeuvrability. They typically have
extendable arms that attach to the legs of the bed. This eliminates the need to lift the bed
onto the bed mover, thus improving the safety for the porters. It also provides flexibility to
the hospital operators when buying new beds. Most of the electric bed movers have a
capacity of over 600 kilograms and provide a quiet operation and smooth movement for
increased patient comfort.
Newer innovations include wireless controlled bed movers
As innovation continues, we are now starting to see increasing use of wireless controlled
movers, which allow porters or nurses to move the bed, while walking behind or beside it
through the use of a remote controller. This controller allows them to steer the bed,
adjust speed and bring it to an emergency stop. Some controllers also include joysticks
for additional manoeuvrability. Bed movers are also being developed with anti-microbial
paint to allow it to be easily cleaned and aid in infection control.
We expect increasing use in Asia as universal electric movers are deployed
Despite its advantages of increased productivity and lower workplace injuries, we have
seen limited use of electric bed movers till now. This is mainly because earlier electric
bed movers were not compatible with all the different types of beds and stretchers used
by the hospital operators. However, with the development of more universal electric bed
movers, we have started to see increasing penetration in hospitals in the US and Europe.
Going forward, we see increasing use of these electric bed movers in Asia led by
hospitals in China, India, Malaysia, Thailand and Singapore.
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Fig. 27: Healthcare costs rise while number of hospitals declines → healthcare efficiency being improved through promotion
of comprehensive regional care systems and use of ICT
(¥ trn) National medical care expenditure (LHS)
45 No. of hospitals (RHS) 9,800 Building of comprehensive
regional care systems is
40 9,600 proceeding apace
35
9,400 ・Links between hospitals and
clinics, homes, and long-term
9,200 care
30
9,000
25
8,800
20
8,600
15 Robotics
8,400
10
8,200
5 8,000 ICT AI
0 7,800
1997
2014
1990
1991
1992
1993
1994
1995
1996
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2015
Source: Nomura
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Source: Nomura
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Fig. 29: Diffusion process of healthcare x ICT in Japan; from EMR to EHR and PHR
Data usage
venues
1970s 1980s 1990s-2000s Since 2010
Departmental
In hospitals systems In-person consultations Remote consultations (telecare)
and clinics Interdepartmental
systems
Source: Nomura
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#1: Telemedicine
Telecare: 15-second snapshot—summary and conclusions
★FY18 revisions to medical treatment reimbursements are likely to attach more value to
remote treatment (telecare). If only phone-based follow-up consultations are shifted to
telecare, it would amount to a ¥540bn market.
Medical Practitioners’ Act,
★ MRT and several unlisted companies are developing telecare platforms and models Article 20: In-person treatment
for facilitating appointments, treatment, and drug prescriptions. This article states that “No
★ M3 and MedPeer are focusing on fee-based remote treatment consultations with medical practitioner shall
models that may facilitate customer and revenue management. provide medical care or issue
a medical certificate or
Telemedicine industry expected to support more effective use of healthcare prescription without personally
resources and provision of regionally integrated care performing an examination,
Healthcare expenditure continues to rise as the Japanese society becomes super-aged, nor shall he/she issue a birth
heightening the need for measures to control the rise of such expenses and for more certificate or certificate of
efficient management of medical facilities. We think telemedicine has considerable stillbirth without personally
potential as one way to provide healthcare services more efficiently. Recognising the being in attendance at the
potential for the growth of telemedicine, numerous venture companies have begun birth, nor shall he/she issue an
developing telecare services for patients. The use of telecare methods could receive a autopsy certificate without
boost from forthcoming revisions to medical treatment fees in FY18, as the Japanese personally performing the
government may introduce a treatment reimbursement system for telecare services autopsy.”
similar to that for in-person consultations. We therefore expect to see the steady
development of a telemedicine industry in Japan.
Rough estimate of the potential size of the telecare market
According to a 2015 report concerning healthcare use in industrialised nations of the
OECD, the number of annual doctor consultations per capita is 12.9 in Japan, versus the
OECD average of 6.6. Assuming that greater uptake of telecare causes hospital visits in
Japan to fall to the OECD average, we can calculate the incidence of remote diagnostic
sessions by subtracting 6.6 from 12.9 and multiplying the result by roughly 120mn
people, yielding approximately 756mn remote sessions. Multiply this by the 72-point
(¥720) reimbursement for follow-up consultations by telephone, and we calculate a
market of ¥540bn or so solely for the use of telecare in place of phone-based follow-up
consultations. We also include in the market for telecare the fees earned by companies
providing the necessary platforms and systems. Diagnosis and treatment apps represent
a new business opportunity that supports telecare and therefore will support the
formation of this new market.
Looking at overall healthcare expenditure, it may appear we simply assume that face-to
face follow-up consultations will be supplanted by telecare. However, we also envision
the following positive effects from the rise of telecare: (1) if hospitals promote outpatient
care (including telecare), large hospitals should operate more efficiently (creating more
opportunities to perform surgeries, etc) and the number of hospital visits should
decrease, which in turn should (2) facilitate ongoing management and prevention of
lifestyle-related diseases, and (3) minimise the interruptions of work and daily activities
caused by consultations.
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2413 M3 Remote gene Counseling using telephone or web conference Collaboration with family doctors for ¥15,000/30
Telemedicine counseling systems with clinical genetics specialists min, including second opinion function
consultation
Monthly fee of ¥324 for an unlimited number of
AskDocotors Doctors answer patients' questions
questions
Uses proprietary imaging technology to Collaboration with Secom's data centers and
Mobile telecare
9735 Secom Telecare reproduce the color of the patient's complexion EMR systems to compare with past imaging
system
and diseased areas for visual diagnosis data to track a condition over time
Remote Developing remote diagnostic imaging Has more than 400 radiologists. Diagnoses of
Noritsu
7744 radiography Doctor Net diagnosis, image analysis, and cloud-based images received by 18:00 are submitted at 12
Koki
service image storage services noon the following business day.
Port is working on joint clinical research with Tokyo Women’s Medical University on
telecare for hypertension. This study uses a special app to automatically send data
measured by the patient using a specialised blood pressure monitor. Specialist
physicians use this data for consultation with the patient via chat or video conferencing
within the app.
In telemedicine consultation services, M3 leads the market with its AskDoctors service,
which allows patients to ask doctors questions on the web. Over 5,000 physicians field
patients’ questions on the website, and at least 99% of questions are answered within 24
hours. Other companies’ services that involve consultation between doctors and patients
include firstcall, acquired by MedPeer in July 2016, and MRT's Pocket Doctor app for
sharing weight and blood pressure data.
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★ Watson has pioneered the introduction of AI in the medical field globally, but
Japan’s KIBIT AI technology is approaching practical realisation in healthcare.
Worldwide deployment of
Construction of Japanese ICT integrated community care system
Japanese ICT integrated A society that enjoys healthful
by utilizing advanced electronic health records (EHRs)
community care system
life and longevity
- From treatment medicine to
Telemedicine and Complete medical checkup Personal healthcare advanced preventive medicine
home medical care at home concierge
Organ transplants,
regenerative medicine Replacement of body functions with artificial organs
Care facilities
with installed sensors Nanorobots that work inside the human body
Source: Nomura
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The potential in AI
In the healthcare field, we expect the use of AI to help simplify procedures with medical
treatment and long-term care, reduce the burden on medical professionals and care
providers, and improve the quality of life (QOL) of patients. With the evaluation of
medical images and in drug development and operating theatres, for example, we expect
new diagnostic and therapeutic methods to be identified by using AI to accurately and
quickly draw on the knowledge of a vast number of forerunners available in such forms
as academic papers and treatment data. As diagnostic support with AI advances, it
should free up physicians and caregivers to spare time for the treatment of and
communication with patients or care recipients (even if physicians or other professionals
still need to make diagnoses or other judgments). Measures to alleviate risks of falls or
prevent patients wandering off by projecting the behaviour of dementia and other
inpatients are already being implemented. Fig. 31 shows the part of the AI roadmap
produced by Japan’s New Energy and Industrial Technology Development Organization
(NEDO) that relates to the healthcare field. Initiatives have already been started in areas
indicated under "Phase 1," including AI-based diagnostics support, drug discovery
support, and smart operating rooms.
Drug discovery
Pfizer
research support
Source: Nomura
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Note: Picture shows Kibiro, Fronteo's KIBIT-powered robot. No. of people covered is from company data.
Source: Nomura, based on company data
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Transfer assistance for nursing care Robot Suit HAL for Care Assist (lumbar-support type) CYBERDYNE
(wearable) Muscle Suit for Care Assist Kikuchi Seisakusho
Transport robot Hug T1 Fuji Machine Mfg
Transfer assistance for nursing care (non-
Resyone Plus Panasonic AGE-FREE
wearable)
Robohelper Sasuka Muscle
Electric powered walking frames RT. Works
Outdoors transfer
Walking assistance robots Kawamura Cycle
Toilet support Vacuum Waste Drainage Assist Portable Toilet System Aronkasei
3D electronic mat-type patient monitoring system Noritsu Precision
Silhouette monitoring sensor King Tsushin Kogyo
Long-term care facilities
Contactless, unbounded bed monitoring system Ideaquest
Monitoring
Systems for long-term care facilities with sensors to monitor patients getting
VR Techno center
out of bed
Source: Nomura, based on METI/AMED projects to promote the development and introduction of robotic devices for nursing care
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Source: Nomura
Network-type: HAL for medical/healthcare applications
(Cyberdyne)
A leader in therapeutic robotic devices
HAL for Medical Use was approved in 2014 for workers' compensation insurance in
Germany. In Japan it began to be used under public insurance coverage in 2016 in the
treatment of patients with neurological disorders. Treatments using HAL for Medical Use
also began in 2017 in Poland (private insurance) and Saudi Arabia (public insurance). In
the US, HAL received marketing approval for the indication of spinal cord injury in
December 2017.
A number of robot exoskeletons have appeared around the world that appear
similar to HAL, but they are completely different
A variety of exoskeleton devices exist that provide support for patients’ body function
through being attached to the lower limbs. ReWalk and Indego (Parker Hannifin) have
already received US FDA manufacturing and marketing approval as medical equipment.
In Japan, too, Toyota Motor began selling its rehabilitation support robot Welwalk WW-
1000 in 2017.
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Apparently used as
Lower-limb training, Website records uses including
Ekso Bionics US Ekso GT - rehabilitation tool for
wearable rehabilitation in treatment of stroke
therapeutic purposes
Walk assistance support robot to help
device, rehabilitation- the treatment of such
use device conditions as stroke Walk support for
spinal injury patients,
Robot itself has no After- improvement in
Parker Hannifin US Indego -
therapeutic effect market patient QOL through
walking used as
wearable device
Support for
Company expects Being used in clinical research
rehabilitation from leg
Welwalk contribution to in 23 medical institutions
Toyota Motor 日本 paralysis resulting Rental
WW-1000 recovery in lower limb nationwide (as of end-March
from disorders such
functions 2017)
as stroke
Aim of HAL is to help patients recover motor function once equipment is detached
The aim of HAL for Medical Use is to achieve therapeutic benefits such that people's
physical functions recover so they can walk even without the equipment being attached.
In this, HAL differs radically from other exoskeleton models.
HAL works by sending electrical signals to the brain. In this it differs from the approach of
generating muscle movement through myoelectric muscle stimulation. Put simply, with
patients for which the brain is unable to relay signals to the musculoskeletal system
through nerves, HAL's sensors analyse the direction of the body ordered by the brain,
the strength of movement, and adjustments to the body's centre of gravity and directs
the power units at each joint. The system enables minor adjustments, such as "move
slowly," "move fast," or "step by 45 degrees" (because there are obstacles in the way).
In addition, when HAL drives and supports the body movement, it provides feedback on
the movement of muscles and nerves to the brain via sensors. In this way information
gradually comes to be smoothly communicated between the brain and the body,
ultimately leading to improved bodily operation without using HAL.
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Fig. 38: Society 5.0/zero intensive-nursing care society and Cyberdyne; recently it’s called 5.1
Serious social issues Cyberdyne's challenges Realization of goal of a zero intensive nursing care society
Life support
・Improving independence of Cybernics device
nursing-care recipient
・Dramatic reduction in burden on Dual use of assistive and
industrial/disaster
caregivers
response technologies
Nursing care
recipients, Support Welfare-use HAL
patients ・Innovative changes to social problem- independence,
solving industrial infrastructure health
improvements Cybernic interface Well-being support
Lumbar- support
Mobility Handling robots Vital sensors
HAL
Source: Nomura
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★ M3’s m3.com is the starting point for all healthcare x ICT services, and its value is
expanding for creating healthcare, in addition to changing healthcare.
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Fig. 39: SCOT enables modality connection and real-time monitoring inside and outside operating theatre
Other Surgical strategy desk (doctor’s office use) Control tower role
standards Third Panel Integrated
compliant party operation display
apps app app
apps
Database
Information
sharing
ORiN (middleware) feedback
Other
Patient Electronic
standards DICOM
connection provider
monitor
provider
scalpel
provider ・・・・・
provider
Other standards Various medical Surgical strategy desk (operating theater use) Real time feedback
Patient
compliant imaging and
medical devices testing devices
monitor
Electronic
scalpel ・・・・・
Source: Nomura
SCOT enables surgery while sharing data in real time by networking devices
inside and outside the operating theatre
The Smart Cyber Operating Theater (SCOT) connects various medical devices both
inside and outside the operating theatre to enable the immediate consolidation of
information about procedural progress, patient condition, and other factors, and the real-
time sharing of the same information between doctors and staff. Specifically, the various
medical devices used in the operating theatre (eg, endoscopes/microscopes, MRI
systems, ultrasound systems, electronic scalpels, anaesthesia systems, shadowless
lamps, and patient monitors) are connected via the OPeLiNK operating theatre
communications interface and data is recorded and shown in a time-synchronised format.
Surgical strategy desk: integrated intraoperative information is displayed inside
and outside the operating theatre
An operating theatre that is networked using OPeLiNK allows doctors and staff both
inside and outside the operating theatre to view images from modality during the surgery,
instrument positioning from the surgical navigation system, operative field images,
biological information, and so forth (surgical strategy desk/OPeLiNK Eye). At present, 20
types of medical devices are connected. According to Professor Yoshihiro Muragaki from
the Tokyo Women’s Medical University, the integrated display at the surgical strategy
desk of information acquired from different devices allows surgery to be performed with
the feeling of taking a foreign language test with a dictionary on hand.
Future of medical care shown by SCOT
Hiroshima University Hospital is operating a package model of SCOT equipped with the
medical devices currently used in operating theatres. It has been used in surgeries to
treat brain malignancies and femoral cancer. Using an intraoperative MRI makes it
easier to precisely remove cancer. Shinshu University plans to deploy a package that
connects medical devices to a device information network in 2018, and the Tokyo
Women's Medical University plans to deploy a robotics-equipped version in 2019 (Hyper
SCOT).
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Anticipated results
• In terms of greater surgical precision, examples include the real-time display of tumour
weight and the risk of harming nervous system motor functions. It would be possible to
measure a procedure's risk of paralysis and other outcomes. Using an intraoperative
MRI would allow confirmation of lesions and remaining diseased cells. The ability to
perform pathological measurement in the operating theatre would help assess risk for
spots that are hard to determine.
• We think higher demand for networked operating theatres could support growth at Air
Water and Ship Healthcare Holdings, which sell customised operating theatres.
SCOT project participants
The following universities and companies are involved in the AMED project entitled
“Research and development of advanced medical devices and systems to achieve the
future of medicine/Development of a smart treatment chamber for the improvement of
both medical safety and efficiency.”
Universities: Tokyo Women's Medical University, Hiroshima University, Shinshu
University, and Tohoku University.
Companies: Hitachi (permanent magnet open MRI system), Denso (robot arms), Mizuho
(operating table equipment), Pioneer (navigation systems), Nihon Kohden (patient
monitors), Central Uni (Ship Healthcare Holdings handles sales and equipment
connection), Toshiba Medical Systems, and Air Water (sales).
Fig. 40: Initiatives to change and create healthcare starting with m3.com
Creating healthcare
Pharm aceutical
com panies
Medical device m akers
○Clinical trial related
○Seeds rocket
○Career
○Cancer genome solution
Internet + real operations ○M3 AI Lab
○Genome diagnostics,
etc
Advanced
m edicine
NEW!
Source: Nomura
M3 has created "e + real" models since 2010, including with clinical trials and actual MRs
using MR-kun. In 2017, it launched efforts to make doctors aware through m3.com of
advanced medical equipment developed by venture companies in which it has invested,
and to provide support to cancer patients for obtaining a second opinion. All of these
initiatives started with the m3.com platform, and the company is creating the impetus to
make conventional marketing methods and procedures more efficient (Fig. 40).
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Paid customers
Local governments
Medical associations
sharing system
Core hospitals
Information
・Regional support
・Care plan creation
・Visitation care planning business
・Care planning ・Monitoring
・Care documentation ・Consultation services
Level 1 ・Documentation ・Representative consultation Paid customers
・Monitoring ・Care management
・Insurance claims ・Benefits management and Comprehensive
・Care insurance claims support
... claims regional support center
..... ・Care insurance claims
... Care manager
..... Care providers
Doctor
(hospital, in-home care)
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and remote monitoring by therapists. This program has also helped to improve
productivity of therapists and service providers. This telerehab program is largely
targeted towards patients recovering from conditions including stroke, fractures and
musculoskeletal conditions.
Private operators such as IHH Healthcare also exploring telemedicine services
Despite falling behind the public sector, we see the private healthcare operators trying to
increasingly make up lost ground in the field of telemedicine. Amongst them, we see IHH
Healthcare being at the forefront with the company introducing tele-consultation services
on its own platform to patients of its primary care segment in Singapore. We also
understand that the company plans to roll out more telemedicine initiatives for its hospital
operations in the near future.
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As the population in the country ages with people suffering from multiple chronic
conditions needing to visit more than one doctor for treatment, sharing of information has
become increasingly important. Given this, the MOH now plans to make it compulsory for
all healthcare providers including private operators to upload patient data to the
centralised NEHR. We expect these proposed changes to be passed by parliament in
2018 with healthcare operators having a grace period of two to three years to streamline
and link their health records with the centralised NEHR. This would make Singapore one
of the firs countries to establish such a comprehensive system. We understand that the
government plans to set aside SGD20mn towards helping medical practices offset the
costs of updating their IT systems in order to link to the NEHR.
The NEHR will enable a doctor to have all the relevant medical information needed to
help them diagnose and treat their patients. The availability of historical information is
also useful especially in the case of elderly patients who may not know or recall their
diagnosis and the medications they have been prescribed. We understand that the MOH
plans to ensure that the information in the NEHR is accessible only to the doctors or
physicians treating the patients and will not be accessible by the employers and insurers.
Moreover, patients can also proactively decide to opt out of the system if so desired.
We expect the shift to NEHR to benefit larger private operators like IHH and Raffles
While the public healthcare providers have shifted to the NEHR, nearly all the large
private operators including IHH Healthcare and Raffles Medical have maintained their
own electronic health record systems. With the government planning to make the NEHR
system compulsory, we see the private operators facing an upfront cost to synchronise
their health records with the central. However, we do not expect this cost to be very
significant for the larger operators and we see them benefiting in the long run as the
ready availability of comprehensive health records will make it easier for patients to
transition from public to private hospitals and from small GPs to full scale one-stop
medical centres. Already, IHH has said that it will add patient data from its hospitals and
medical clinics to the NEHR from November 2018.
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The Malaysian healthcare system is organised into two tiers with public healthcare Raghavendra Divekar, CFA - NSC
system for all citizens and a private healthcare system for the affluent, citizens with raghavendra.divekar@nomura.com
+81 3 6703 1229
private insurance and foreigners including medical tourists. Under the government’s
Vision 2020, the goals of the healthcare system are to ensure universal access, improve
equity, efficiency and the quality of life of the population. As the disease profile in
Malaysia shifts from the treatment of communicable diseases to more chronic ailments,
the government has been faced with rapidly upgrading its healthcare infrastructure to
meet the needs of its ageing population. To tackle this changing profile, government
agencies and healthcare providers in Malaysia, both public and private, are increasingly
using technology and IT services to improve the healthcare delivery system and provide
quality care to patients. Some of the measures being adopted in Malaysia include the
use of Health Information Systems (HIS), telemedicine and robotic surgery.
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The patient first needs to register or log in to the system with just their basic information.
The patient can then choose the speciality of the doctor they would like to talk to and
input their symptoms or questions into the system. This helps to direct the patient
towards the appropriate doctor or specialist and the patient can then choose whether to
start an audio or video interaction. Once directly connected with the patient, the doctor
can provide a diagnosis, recommend treatment and even issue an electronic prescription
for the patient which can be downloaded from the website. Some of the major illnesses
or treatments include skin conditions, cold/fever, urinary tract infections or minor injuries.
DoctorOnCall has also expanded its healthcare footprint by becoming Malaysia’s first
online prescription based pharmacy and has combined its extensive network of doctors
and comprehensive medicine portfolio. The online pharmacy can fill the electronic
prescriptions if needed and also offers deliveries for various medications with an average
delivery time of 4-6 hours for areas within Kuala Lumpur and Klang Valley and 1-2 days
for rural areas.
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Less invasiveness
Thai hospitals have increasingly invested into minimising invasiveness of surgical
procedures, which has such advantages as: 1) reducing patient’s pain; 2) shortening
hospitalisation and recovery time; and 3) lower risk of unpleasant effects. Less invasive
procedures worth discussing include:
Minimally invasive surgery (MIS):
• Minimally invasive surgery is the surgery procedure where several small incisions
(mostly a few centimetres) to the skin are made and an endoscope is passed through
one of the incisions. Surgeons will see a clear and magnified view of the surgical areas
from the images generated from the endoscope, and perform the operations with
special instruments passed into the body through the other incisions.
• MIS can be used to treat irregularities in several body parts, such as urinary system
diseases, digestive system (stomach, intestines) diseases, appendicitis, gall stone,
tumour, Spondylosis (degenerative conditions of spine), etc.
• Compared to the open, conventional surgery, MIS offers less pain, less scarring, and
quicker recovery. Hospitalisation period can also be reduced from 7-14 days to 1-3
days. Adoption of MIS as an alternative for patients benefits hospitals in as revenue
intensity and operation efficiency should increase, due to the more advanced
technology used and shorter patient stay.
• MIS is largely available in major hospital chains, including Bangkok Hospital (BDMS),
Samitivej Hospital (BDMS), Phyathai Hospital (BDMS), Paolo Hospital (BDMS),
Bumrungrad Hospital, Kasemrad Hospital (BCH), Chularat Hospital (CHG).
CardioInsight™ Noninvasive 3D Mapping System (CardioInsight™ Vest):
• CardioInsight system is a non-invasive mapping system used for detecting problematic
heart cells that cause heart rhythm disorder. A high-tech vest is combined with CT scan
process to produce detailed 3-D cardiac maps.
• Conventional cardiac mapping is actually an effective tool to identify the cause of the
irregular heartbeat, but it requires catheterisation, in which a long thin tube will be
inserted in and pass through patient’s large blood vessel to the heart. Although it is
considered a minimally-invasive procedure, it can cause bleeding, infection, and pain at
the catheter insertion site, as well as patient’s anxiety.
• Unlike MIS, the CardioInsight is a new, and not yet a commonplace service.
Bumrungrad Hospital is one of the three hospitals in the world (as of January 2018),
and the first in Asia, that offer CardioInsight.
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MAKOplasty
MAKOplasty is a surgical procedure for partial knee or total hip replacement using a RIO
Robotic Arm Interactive Orthopedic System developed by MAKO Surgical Corp. Joint-
related surgeries require extreme delicacy and precision. Studies show that use of
MAKOplasty tends to decrease in the friction between their implants and bones, leading
to less pain and quicker recovery.
Swisslog
Swisslog is an automated drug-management system. Bumrungrad Hospital implemented
Swisslog since 2008 and was the first hospital Asia to implement such a system.
Swisslog ensures higher accuracy and lead to hospital operation efficiency by removing
the human factor and allowing for the automation of preparation, packaging, and
dispensation of prescription medication that are tied in to the same barcode assigned to
each doctor upon registration.
The da Vinci Robot
The da Vinci Robot is used in the treatment of prostate cancer, as well as surgeries
within the kidney, uterus, pancreas, or intestines, for which fine precision is needed, due
to cavity areas. The da Vinci Robot is controlled by the surgeon through an imaging and
control system, while the robot carries out the necessary movements for the procedure.
Advantage is less damage to healthy tissue, a smaller incision and scarring, and a much
faster healing time. In addition to Bumrungrad Hospital, some of the hospitals under
BDMS’ Bangkok Hospital brand also provide treatments with the help of the da Vinci
Robot.
Robot-assisted spine surgery
Robot-assisted spine surgery is a surgical procedure that uses a robot in instrumentation
part of a spinal operation. The robot uses sophisticated software synchronised with
images from intraoperative 3D scanner to maximise accuracy of implant fixation.
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Source: Deloitte and CII – ‘Medical Technology – Shaping Healthcare for all in India’, Nomura research
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Some state governments have tied up with private players and operate the telemedicine
centres under PPP (Public Private Partnership) model. For instance, the Government of
Himachal Pradesh has tied up with Apollo Hospitals to run such centres. Typically a
telemedicine centre would cost ~USD10,000 to be set up, which is quite a large capital
to be employed and the same may not be available in a rural area. Therefore, some form
of government support would be required. Further, it is important to train the local
population to run the system. The telemedicine centres can also be used for the purpose
of medical education as these centres are linked to medical institution in cities.
Robot-assisted surgeries
Robotic surgeries use a very small tool attached to a robotic arm to conduct surgeries.
The advantage of robotic surgeries is that the incision is small, which leads to faster
healing and shorter hospital stays, which increases the infrastructure efficiency. There is
rapid expansion in robot-assisted surgeries in India. From less than 10 robots in 2011,
the number of robots in Indian hospitals has expanded to 50, carrying out 700 robot-
assisted surgeries a month, according to ET Healthworld. Private sector hospital
companies are actively deploying the technology to improve efficiency. As per company
disclosures, Apollo conducts ~1,000 robotic surgery a year and Fortis more than 200.
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China – key trends include telemedicine China Health Care & Pharmaceuticals
Rapid development 2010 & 2011 Government implemented two phases of regional telemedicine pilot
stage project construction, covering 500 county-level hospitals and 62
provincial-level Grade III hospitals in 22 central and western
provinces.
Expansion stage since 2012 China-Japan Friendship Hospital, the Second Affiliated Hospital of
Zhejiang University, First Affiliated Hospital of Zhengzhou University
took a positve lead in the telemedicine technology. The telemedicine
has been further expanded.
Telemedicine in China is led by Grade III hospitals and mainly includes the remote
diagnosis, live video consultation and patient records sharing between Grade III
hospitals and other lower graded hospitals. For example, the doctors in the primary
hospitals can share the test results or scan image to doctors in Grade III hospitals and
ask for remote diagnosis and consultation. This greatly improves the accuracy of
diagnosis and save the patients’ time and money. China-Japan Friendship Hospital, a
hospital directly affiliated with China’s Ministry of Health, is a front runner of telemedicine
program. Since 2015, more than 5,000 medical cases are treated under the telemedicine
program per year. Cumulatively, the telemedicine program saves the patients in remote
areas ~RMB70mn. In addition to the nationally well-known Grade III hospitals, some
provincial Grade III hospitals also play a key role in the development in telemedicine. For
example, Xinjiang and Yunnan benefit from the pilot project construction in 2010 & 2011
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Nomura | Asia Pacific hospitals 14 June 2018
(Fig. 50) and each of the 2 provinces treats more than 10,000 medical cases per year
under the telemedicine program.
Looking ahead, along with the implementation of multi-level diagnostic and treatment
system, we think the scope of telemedicine in China hospitals will be further expanded.
Robotic surgery
Generally speaking, in terms of the application of robotic surgery, China is lagging
behind the developed countries, yet we have seen rapid growth in recent years. The
most widely used robot is Da Vinci produced by Intuitive. Currently, there are no
domestic robots directly competing with Da Vinci. Da Vinci significantly improves the
accuracy of the surgery and minimises the invasiveness of the incisions. Launched
China in 2006, Da Vinci is mainly applied in urology, thyroid, gynaecologic oncology,
gastrointestinal and paediatric surgeries.
By end-2017, 69 Da Vinci robots are used in China’s large Grade III hospitals and
premium private hospitals such as United Family Hospitals. Benefit from China’s large
population, the utilisation rate per Da Vinci robot ranks No.1 worldwide. In 2017, the
annual average surgery volume per Da Vinci robot in PRC is 393.6 (3 times of the global
average). Total surgery volume in PRC and Hong Kong amounts to more than 28,000,
implying 46% y-y growth.
The capital cost of a Da Vinci robot in China is RMB20mn. The annual cost of Da Vinci is
~RMB1.2mn, including procedure fee and fee for replacement of robot arms. ASP of one
Da Vinci surgery is RMB30-50k, which can hardly be afforded by medical insurance.
Thus, the pay-back period for the hospital is less than one and a half years.
In our view, the reclassification of Da Vinci from Type A medical equipment to Type B is
likely to accelerate the volume growth of the robot. Before April 2018, Da Vinci is a Type
A medical equipment. The purchase of Da Vinci robots is subject to the approval of
NHFPC (National Health and Family Planning Commission). Only certain hospitals with
the certificate & capability to use Type A medical equipment are eligible to purchase Da
Vinci. For the past several years, NHFPC only approved the purchases of ~10 Da Vinci
robots per year. Since April 2018, Da Vinci has been reclassified to Type B medical
equipment, the purchase of which is subject to the provincial Health & Family Planning
Commission. We think the purchase of Da Vinci will be boosted after the reclassification.
In May 2017, Fosun (2196 HK & 600196 CH, Not rated) established a joint venture
named Intuitive Fosun with Intuitive Surgical. Fosun owns 40% equity interest in Intuitive
Fosun while the rest are owned by Intuitive Surgical. The joint venture is principally
engaged in the sale of Da Vinci robots in China. In our view, riding on the robust demand
of robotic surgery, Intuitive Fosun will contribute increasing profitability to Fosun.
On the other hand, the development domestic robots are in a relatively early stage.
Various domestic companies choose to cooperate with Grade III hospitals with strong
R&D capability to develop their own robots for surgical use. Most of them are still in the
R&D stage. Some front runners launched robots for certain specialised therapeutic area,
including Beijing Remebot’s Remebot (Neuro) and Jinshan Tech’s Capsule Endoscopy
System II (Digestive tract).
Going forward, thanks to the robust demand, we think the robotic surgery will enjoy
significant growth. Several key catalysts could include: 1) the price of robotic surgery
becoming lower due to the participation of more domestic players; and 2) certain
surgeries for major diseases being added to reimbursement list in the future.
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Nomura | Asia Pacific hospitals 14 June 2018
The Philippines has 960 private hospitals and 476 public hospitals that will cater to its Dante Tinga Jr - BDO-NS
dante.tingajr@nomura.com
106.5mn population. Public healthcare in the Philippines lags behind its regional +632 878 4969
counterparts in terms of technology. Privately owned hospitals still provide health care to
most Filipinos.
Metro Pacific Investments (MPI PM, Buy) is the only listed company with material
exposure (10% of NAV) to the Philippine health care sector. Subsidiary Metro Pacific
Hospital Holdings, Inc. (MPHHI) operates the largest private hospital chain in the
Philippines. At present, MPHHI’s portfolio consists of 14 hospitals, and over 3,200 beds.
The target is to get to 5,000 beds. MPHHI is 86% owned by MPI and 14% by Singapore
sovereign wealth fund GIC Private Ltd.
Broadly speaking, MPHHI is working on synergy projects to centralise hospital
operations particularly in the area of standardised and integrated information technology
systems (RFID-based Patient Systems, Electronic Medical Records, Electronic
Prescriptions, and Telehealth).
Robotic surgery expected to prosper over the next 5 to 10 years
With regard to robotics in surgery, currently there are only 2 hospitals that offer robotics
surgery. The Medical City (not listed) was first to use this in 2010. St. Luke’s Medical
Center (not listed) followed later on. Robots are being used for complicated procedures
in the field of urology, gynaecology, thoracic, head, neck, oral surgery and colorectal
surgery. Currently, the Philippines only has 3 robots compared to about 183 robots in
Japan. The use of robotics for surgery in the Philippines is quite costly for the patient but
it is less invasive and has lesser complications. Doctors expect this procedure to prosper
in the next 5-10 years as patients are becoming more aware of the technology and its
benefits.
Use of Electronic Medical Records becoming more popular
Electronic Medical Records (EMR) are becoming more popular and increasingly being
used in private clinics. These systems can facilitate workflow and improve quality of
patient care and safety. Some physicians and smaller clinics still prefer handwritten
prescriptions but use of EMRs is seen to increase in the next few years.
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Nomura | Asia Pacific hospitals 14 June 2018
Indonesia’s hospitals are far behind its peers in terms of technology, and we expect this Deidy Wijaya, CFA - PTNSI
deidy.wijaya@nomura.com
to remain the case for the foreseeable future. As of 1Q18, there are only 1,027 public +62 21 2991 3345
and 1,800 private hospitals in Indonesia, serving ~260m population. Beds per 1,000
population ratio is at ~1.3x which is significantly below its peers such as Thailand (2.3x)
and Malaysia (1.9x). Given that Indonesia is still lacking hospitals, the current focus is
still on addition of new hospitals, rather than investing heavily in technology. Moreover,
with the introduction of Universal Healthcare Coverage (UHC) in 2014, private hospitals
in Indonesia are faced with both opportunity as well as challenges. Private hospitals that
participate in the UHC (which at the moment remains optional) are seeing better market
share and patient volume growth. However, this comes at the expense of lower
profitability as well as higher working capital needs (due to the long reimbursement
period). Hence, capex and opex management are becoming more crucial for these
hospitals. Meanwhile, the upper segment of the population prefers to go abroad for
treatment as they perceive the overseas medical service to be superior. Based on data
from Singapore Tourism Board and Malaysia Healthcare Travel Council, 47.2% and
56.8% of the total medical tourists in Singapore and Malaysia respectively are from
Indonesia. This implies a big potential for the domestic hospitals (to bring back the
patients back to Indonesia), but it is likely to take time as Indonesia needs to solve
several bottlenecks such as the lack of specialists, insufficient funding as well as lack of
training for its medical professionals.
Robotic surgery is currently available in only one hospital in Indonesia
Most of the technologies that we discussed in the report are not available in Indonesia,
due to the reasons mentioned above. However, robotic surgery was actually introduced
as early as 2012 in Rumah Sakit Bunda (unlisted) in Indonesia. Since then, no other
hospitals in Indonesia has adopted this technology, likely due the lack of popularity and
unattractive return on investment.
Siloam’s technology is the most advanced among its peers
Among the private hospital groups, Siloam (SILO IJ, Buy) is the most technologically
advanced. SILO has a relatively strong focus on technological investment and also
provides Digital Telemedicine “Hub and Spoke”. SILO equips its hospitals with state-of-
the-art facilities and it also carry the first and only Gamma Knife in Indonesia, installed in
2012. SILO has previously mentioned that it has the plan to use Electronic Health
Record (EHR) in the future.
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IHH Healthcare Bhd IHHH.KL IHH MK
Key company data: See next page for company data and detailed price/index chart.
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | IHH Healthcare Bhd 14 June 2018
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As IHH’s hospitals in Malaysia and Turkey also look to increase the share of medical
tourists, we have seen an increase in the investments in newer technological innovations
and instruments in those regions as well. IHH’s Gleneagles Kuala Lumpur hospital is one
of the few hospitals in Malaysia to provide robotic surgery, while we understand that
there are more than five surgical robots in Acibadem. The Acibadem Altunizade is one of
the few hospitals in the region to have a hybrid operating room allowing doctors to
conduct more specialised and complex surgeries. We see the use of these technologies
helping to drive up the revenue intensity in these regions.
Proton beam therapy at Novena to be the first one in South East Asia
Proton beam therapy is a type of radiotherapy that uses beams of protons to destroy
cancerous cells. As compared to conventional radiotherapy, which apart from destroying
cancer cells also damages the surrounding tissue, proton beam therapy stops once it
reaches the cancerous cells and thus does much less damage to the surrounding tissue.
These machines use a particle accelerator to speed up the protons and thus need to be
housed in a concrete bunker that serves as a radiation shield. Due to this, the total cost
of installing such a machine can reach ~SGD100mn. There are currently no proton beam
therapy systems in South East Asia with the first ones being installed in Singapore at
IHH’s Mount Elizabeth Novena and at the National Cancer Centre Singapore (NCCS) at
Outram, both of which are expected to come online in 2021.
Proton beam therapy can be useful for the treatment of brain cancer, especially in
children and can also be used for prostate, oesophagus and breast cancer. The NCCS
expects to treat 150 patients in the first year before building to about 1,000 patients
annually. While we expect the utilisation of the proton beam device at IHH to be less
than half that at the NCCS, we believe the machine could help attract medical travellers
and local patients for cancer treatments to the hospital, further build its brand and help to
raise its revenue intensity.
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Nomura | IHH Healthcare Bhd 14 June 2018
Fig. 52: IHH hospitals have seen a higher revenue per inpatient CAGR over FY15~17 as compared to Raffles Hospital
Mounth Elizabeth Novena Mount Elizabeth Raffles
25%
21%
20%
17%
15% 14%
14%
13%
12%12% 12% 12%
12%
11%
10% 10%
10%
7%
7%
6% 6%
5% 5%
5% 5%
3%
2%
2% 2%
1%
1%
0% -2% -3%-5%
URTI
Normal childbirth
Urinary stones
Colonoscopy
Haemorrhoidectomy
Gastroenteritis
Viral illnesses
-5%
-10%
Note: Growth rate is calculated based on the middle bill size. FRS - Female Reproductive System, UT – Urinary tract, URTI – Upper respiratory tract infection, UTI – UT infection.
Source: Ministry of Health, Nomura research
The Mount Elizabeth Novena (MEN) hospital started operations only in 2012 and was
fully ramped up to its full capacity of 333 beds in 2017. In comparison, the 345-bed
Mount Elizabeth Hospital (MEH) has been operating since 1979. Despite this, the
number of high-revenue-intensive surgeries at MEN has already surpassed that of MEH
in many key surgery types, including for spine, shoulder and fractured joints. We believe
it is largely the higher level of technology present at MEN which allows it to do more
revenue-intensive complex surgeries and to attract medical travellers in need of such
surgeries. On the other hand, according to data from the Singapore Ministry of Health,
the only major revenue-intensive surgery that appears to have been done at the Raffles
Hospital is the surgical removal of benign lesions from the female reproductive system.
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Fig. 53: IHH hospitals have conducted more major surgeries during Jul 2016-Jun 2017 as compared to Raffles Hospital
300
250
200
150
100
50
Gall Bladder
Nose
Prostate
Spine
Sinus
Breast
Shoulder
Hysterectomy
Spinal body fusion
Tonsillectomy
Knee reconstruction
Fractured joints
Thyroid
Note: The surgeries are ordered in terms of revenue intensity
Source: Ministry of Health, Nomura research
Fig. 54: Singapore – revenue intensity to record a 6% CAGR Fig. 55: Malaysia – revenue intensity to record a 10% CAGR
(MYRmn) Revenue (LHS) (MYRmn) Revenue (LHS)
Revenue intensity growth (%) (RHS) Revenue intensity growth (%) (RHS)
6,000 14% 3,000 14%
Historical CAGR (RHS) Historical CAGR (RHS)
10% 10%
4,000 2,000
8% 8%
3,000 1,500
6% 6%
2,000 1,000
4% 4%
1,000 2% 500 2%
0 0% 0 0%
FY14 FY15 FY16 FY17 FY18F FY19F FY20F FY14 FY15 FY16 FY17 FY18F FY19F FY20F
Note: Revenue intensity = Average revenue per patient day Note: Revenue intensity = Average revenue per patient day
Source: Company data, Nomura estimates Source: Company data, Nomura estimates
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Nomura | IHH Healthcare Bhd 14 June 2018
For Malaysia, revenue intensity has recorded a CAGR of 9% during FY09~17, although
this has been largely driven by the high healthcare inflation in the country. In FY17~20F,
we see a dual impact of healthcare inflation and rising revenue intensity as IHH’s
Malaysian hospitals including Gleaneagles Kuala Lumpur and Gleneagles Medini attract
medical travellers from Indonesia and Indo China, resulting in revenue intensity
recording a 10% CAGR as shown in Fig. 55.
The revenue intensity for Acibadem has recorded a historical CAGR of 5%. As the
company has continued to upgrade its hub hospitals including the newly-opened
Acibadem Altunizade, we see an increase in the number of medical travellers coming for
treatment to Turkey. Moreover, given the current inflationary environment in Turkey, we
see healthcare inflation rising above historical levels and see overall revenue intensity
recording a CAGR of 10% over FY17~20F as shown in Fig. 56.
IHH’s operations in India are largely focused on domestic patients needing complex
surgeries including transplants and gastro-intestinal procedures. We see revenue
intensity for the India operations growing at historical levels of 10%, as shown in Fig. 57.
Fig. 56: Acibadem – revenue intensity to record 10% CAGR Fig. 57: India – revenue intensity to record 10% CAGR
Revenue (LHS) Revenue (LHS)
(MYRmn) (MYRmn)
Revenue intensity growth (%) (RHS) Revenue intensity growth (%) (RHS)
6,000 12% 1,200 20%
Historical CAGR (RHS) Historical CAGR (RHS)
10%
5,000 1,000
8% 15%
4,000 800
6%
2%
2,000 400
0% 5%
1,000 200
-2%
0 -4% 0 0%
FY14 FY15 FY16 FY17 FY18F FY19F FY20F FY16 FY17 FY18F FY19F FY20F
Note: Revenue intensity = Average revenue per patient day Note: Revenue intensity = Average revenue per patient day
Source: Company data, Nomura estimates Source: Company data, Nomura estimates
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Nomura | IHH Healthcare Bhd 14 June 2018
Fig. 58: Gleneagles Hong Kong hospital’s losses have continued to narrow
(MYRmn)
100
80
60
40
20
0
1Q17 2Q17 3Q17 4Q17 1Q18
Source: Company data
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Fig. 59: Comparison of GHK packaged rates vs. public and private hospitals in Singapore
Hong Kong Singapore
GHK Public Private
Procedure Procedure
(HK$) (HK$) (HK$)
Gastroscopy (OGD) (IV Sedation) (Day surgery) 13,400 Gastroscopy (Day surgery) 1,796 10,331
Colonoscopy (MAC) (Day surgery) 16,700 Colonoscopy (Day surgery) 3,798 16,236
Tonsillectomy & Endoscopic Suction Diathermy Adenoidectomy 39,187 Tonsillectomy and Adenoidectomy 39,763 62,486
Hernia Repair (Unilateral) (Laparoscopic) 55,470
Hernia repair 32,984 95,986
Hernia Repair (Unilateral) (Open) 38,800
Circumcision (28 days of age or less) 21,900 Circumcision (Day surgery) 2,477 24,384
Haemorrhoidectomy (Conventional) 31,200
Haemorrhoidectomy 21,103 59,627
Haemorrhoidectomy (Stapled) 43,970
Hysterectomy (Abdominal) 67,600
Hysterectomy 72,377 136,912
Hysterectomy (Vaginal) 61,540
Ovarian Cystectomy (Laparoscopic) (Unilateral) 66,700 Surgical removal of benign lesions from ovary, uterus and
54,045 107,568
Ovarian Cystectomy (Open) (Unilateral) 58,600 neighbouring tissues like uterine polyps and ovarian cysts
Cataract – Phacoemulsification & Intraocular Lens Implantation (GA) 31,300
Cataract (day surgery) - 38,871
Cataract – Phacoemulsification & Intraocular Lens Implantation (LA) 21,000
Knee Arthroscopy (Diagnostic) 44,600 Knee arthroscopic surgery 69,108 92,400
Total Knee Replacement 26,000 Knee replacement surgery 128,477 -
Carpal Tunnel Release (LA) 21,000
Carpal tunnel release surgery (Day surgery) 4,843 -
Carpal Tunnel Release (GA) 30,800
Note: For Singapore, we use the Middle bill size. For public hospital rates, we use Ward A at the Singapore General Hospital, and for private hospital rates, we use the two
bedded rates at IHH’s Mount Elizabeth Hospital
Source: Company data, Singapore MoH, Nomura research
Fig. 60: Comparison of pricing at GHK and Hong Kong Sanitorium and Hospital
Gleneagles Hong Kong Hong Kong Sanatorium and Hospital
Rooms Daily rate (HK$) Rooms Daily rate (HK$)
VIP Suite On request Suite (with companion room) 23,000
Junior Suite 8,000 Suite (without companion room) 12,600
Private Single 3,600 Private room (Type A) 5,600 - 6,600
Semi-private Single 2,000 Private room (Type B) 3,800 - 4,000
Semi-private Double 1,450 Semi-private single room 2,300 - 2,700
Standard 900 General ward (3-6 beds) 1,060 - 1,630
Radiology Outpatient charge (HK$) Radiology Outpatient charge (HK$)
Computed Tomography (CT Scan) Plain With contrast Plain With contrast
Brain 1,830 3,350 Brain 2,800 4,960
Orbits 3,450 5,310 Orbits 4,610 7,650
Thorax 2,740 5,270 Thorax 3,970 7,340
Abdomen 2,750 5,450 Abdomen 3,510 6,490
Magnetic Resonance Imaging (MRI) Plain With contrast Plain With contrast
Brain 5,570 8,610 Brain 8,090 12,940
Orbits 5,570 8,610 Orbits 8,090 12,940
Abdomen 6,080 9,120 Abdomen 9,400 14,290
Pelvis 6,080 9,120 Pelvis 9,400 14,290
Ultrasound
Thyroid 1,120 Brain 1,310
Neck 1,370 Neck 3,480
Abdomen and pelvis 2,980 Abdomen and pelvis 5,590
Aorta 1,670 Aorta 2,170
Source: Gleneagles Hong Kong, Hong Kong Sanatorium and Hospital
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Fig. 61: TRY has depreciated sharply vs. the USD, euro and MYR since 2016
6 USD (LHS) EUR (LHS) MYR (RHS) 1.5
1.4
1.3
5
1.2
1.1
4 1.0
0.9
0.8
3
0.7
0.6
2 0.5
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18
Source: Bloomberg, Nomura research
2) The continued depreciation of the TRY vs. MYR has given a perception of lower
growth for Turkish operations despite strong constant currency growth for the
Turkish operations. A case in point, in 1Q18, the revenue intensity for Acibadem
declined 8.6% y-y in MYR terms, while, in constant currency terms, it actually grew
14.4% y-y.
50 2,000
1,000
0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
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Nomura | IHH Healthcare Bhd 14 June 2018
Despite the continued volatility of the TRY, the underlying operations of Acibadem
remain strong with continued growth in inpatient admissions coming from the expansion
in Bulgaria and the ramping up of new hospitals, including the Acibadem Altunizade. The
average revenue per inpatient admission has also continued to grow, in constant
currency terms as shown in Fig. 62, due to an increase in foreign patients and more
complex cases undertaken.
Management taking proactive steps to manage Acibadem’s debt
Given the sharp depreciation of the TRY vs. global currencies in YTD18, IHH has taken
a number of proactive steps to address the debt concerns for Acibadem, including:
1) Limiting the capital expenditure for new hospitals – we understand that Acibadem has
decided to defer two upcoming hospitals in Turkey – the 128-bed Acibadem Atasehir and
the 120-bed Acibadem Kartal. These greenfield projects were expected to require capex
of ~MYR375mn but are currently being evaluated. We assume that there will be no new
hospital investments for Acibadem in FY18~20F.
2) Refinancing USD250mn of debt due in 2018 – we understand that Acibadem has
been able to refinance the USD250mn of debt due in 2018 at a fixed rate of ~1.5% as
compared with 3% earlier. This has been done in the form of a subordinated debt backed
by Acibadem shareholders. We understand that Acibadem is planning to convert a
significant part of this debt into TRY to hedge it against their operations.
While we expect significant unrealised foreign exchange losses related to non-TRY
borrowings in 2Q18, we believe management’s proactive steps could stem further losses
in FY18 and could also benefit the company once the currency volatility reduces.
We expect Acibadem to return to profitability in FY20F
We expect revenue at Acibadem to grow by 8% y-y in FY18F, 10% y-y in FY19F and
FY20F. We see the weak TRY and stabilising geo-political situation resulting in an
increase in the number of medical travellers to Acibadem hospitals in Turkey and
Bulgaria for treatment. We note that most of these travellers are Europeans of Turkish
origin and expect them to account for ~10% of Acibadem’s inpatient revenues over this
time period. We also see revenue intensity rising, especially for hub hospitals like
Acibadem Altunizade due to more complex cases aided by the company’s investments in
technology such as robotic surgery and hybrid operating rooms. Overall, we see the
EBITDA for Acibadem being maintained at 16% during FY18~20F and we see a return to
net profitability from FY20F.
5,000 15%
4,000 10%
3,000 5%
2,000 0%
1,000 -5%
0 -10%
FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F
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Nomura | IHH Healthcare Bhd 14 June 2018
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• Greater China operations: The company’s Greater China operations consist of stakes
in hospital projects in Hong Kong (60%), Shanghai (70%) and Chengdu (70%) and
Nanjing (60%).
Using a sum-of-the-parts valuation, we arrive at an equity valuation of MYR57.3bn for
IHH, resulting in a target price of MYR7.10, as shown in Fig. 65. This implies a target
FY19F EV/EBITDA of 18.7x and a target FY19F P/E of 49.9x.
Total 58,044
Net cash 236
Market Cap 58,280
Value per share 7.1
Upside 16.6%
Source: Nomura estimates
Fig. 66: IHH – 1-year forward EV/EBITDA (x) Fig. 67: IHH – 1-year forward P/E band
Price (MYR)
30
10
25 9
8
20 7
6 75x
15 70x
5
65x
60x
10 55x
4 50x
45x
3 40x
5 35x
2
0 1
Jul-12 Jun-13 May-14 Apr-15 Mar-16 Jan-17 Dec-17
0
Jul-12 Jun-13 May-14 Apr-15 Mar-16 Jan-17 Dec-17
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Nomura | IHH Healthcare Bhd 14 June 2018
As shown in Fig. 68, IHH trades at an FY19F EV/EBITDA of 16.2x, which is at a discount
to its regional peers due to its low ROE.
2017 11,143 1,805 1,165 916 1,433 (122) 828 1.00 828 0.1
2018F 12,515 1,531 904 957 800 (61) 1,708 1.07 1,592 0.2
2019F 14,132 2,038 1,583 999 816 (73) 2,126 1.15 1,846 0.2
2020F 15,915 2,354 2,004 1,042 832 (105) 2,433 1.24 1,968 0.2
2021F 17,691 2,788 2,516 1,086 849 (128) 2,833 1.33 2,136 0.3
2022F 19,453 3,230 3,044 1,131 866 (79) 3,173 1.42 2,229 0.3
2023F 20,946 3,613 3,545 1,176 883 (112) 3,549 1.53 2,323 0.3
2024F 22,489 3,963 3,957 1,223 901 (67) 3,841 1.64 2,342 0.3
2025F 23,677 4,218 4,271 1,270 919 (116) 4,163 1.76 2,366 0.3
2026F 24,733 4,375 4,492 1,318 937 (50) 4,304 1.89 2,279 0.3
2027F 25,770 4,519 4,702 1,368 956 (125) 4,588 2.03 2,263 0.3
2028F 26,800 4,651 4,906 1,418 975 (52) 4,732 2.18 2,175 0.3
2029F 27,853 4,781 5,110 1,469 995 (129) 5,041 2.33 2,159 0.3
2030F 28,961 4,914 5,323 1,522 1,015 (61) 5,229 2.51 2,087 0.3
Terminal Value 28,961 4,914 5,323 1,522 1,015 (61) 80,457 2.51 32,107 3.9
(Adjustments)
+Short term investments 0 0.0
+Cash 6,030 0.7
+Other 0 0.0
=Enterprise Value 65,900 8.0
-Interest bearing debt 5,794 0.7
=Enterprise Value-Debt 60,106 7.30
(Assumptions)
Diluted Shares 8,239.6 Million Risk Free Rate 4.2%
Long term Tax rate 22% Risk Premium 5.3%
Terminal Growth Rate 0% Beta 0.8
Cost of Equity 8.4%
WACC 7.3%
Source: Nomura estimates
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Fig. 70: IHH Healthcare: Revenue to record a CAGR of 13% over FY17-20F
(MYRmn) Parkway Pantai Acibadem IMU Health Plife REIT and others
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F
Source: Company data, Nomura estimates
While Singapore remains the largest market for IHH, its share has steadily declined from
58% in FY11 to 35% in FY17. This is largely due to the incorporation of: (1) Acibadem,
which accounts for all of its sales in the Central and Easter Europe, Middle East and
North Africa (CEEMENA) region and has seen its share rise from 30% in FY12 to 36% in
FY14, and (2) India and China which have seen their share rise to 9% in FY17.
80% 2,059
1,200 2,586 2,652
2,953
3,480 3,854
60%
1,219
0%
FY11 FY12 FY13 FY14 FY15 FY16 FY17
Source: Company data, Nomura research
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Fig. 72: Breakdown of operating expenses (FY17) Fig. 73: Staff costs as a % of revenue to stabilise at 41%
50%
45%
Other
expenses
16% Consumables 40%
21%
Depreciation
9% Purchased 35%
and
contracted
services 30%
9%
25%
FY10
FY15
FY11
FY12
FY13
FY14
FY16
FY17
FY18F
FY19F
FY20F
Source: Company data, Nomura estimates Source: Company data, Nomura estimates
0.050
0.8%
0.040
0.6%
0.030
0.4%
0.020
0.2%
0.010
0.000 0.0%
FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F
Source: Company data, Nomura estimates
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constant through FY17. Given IHH’s strong operating cashflows and cash balances, we
expect the company to continue to maintain its pay-out ratio of ~30% and pay dividends
per share of MYR0.035 in FY18F, MYR0.040 in FY18F and MYR0.050 in FY18F. We
see the company’s dividend yield rising from 0.5% in FY17 to 0.8% by FY20F.
Strong balance sheet should aid capacity expansion
IHH Healthcare has a strong balance sheet and despite its aggressive capacity
expansion in its three home markets, it has a net debt to equity of only 11% in 1Q15. We
believe this is largely due to its large equity base and strong operating cashflows.
Despite a total capex estimate of ~MYR3bn over FY15~17F, we see the company
continuing to reduce its net debt to equity to 4% by FY17F as shown in the exhibit below.
We believe this sets the company up well to continue to expand capacity by building new
hospitals and upgrading its existing hospitals.
(500) -15%
FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F
Source: Company data, Nomura estimates
Others
USD 6%
7% EUR
32%
HKD
16%
SGD
JPY
18%
21%
98
Nomura | IHH Healthcare Bhd 14 June 2018
100
75
50
25
(25)
(50)
(75)
FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F FY20F
Source: Company data, Nomura estimates
99
Bangkok Dusit Medical Services
BDMS.BK BDMS TB
EQUITY: HEALTH CARE & PHARMACEUTICALS
Key company data: See next page for company data and detailed price/index chart.
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Bangkok Dusit Medical Services 14 June 2018
101
Nomura | Bangkok Dusit Medical Services 14 June 2018
Fig. 78: Increasing intensity supports growing IPD bills Fig. 79: Increasing intensity supports growing OPD bills
Revenue per patient day (THB) Revenue per OPD visit
Revenue per patient day (LHS) Revenue per OPD visit (LHS)
26,500 y-y (RHS) 14% 3,300 y-y (RHS) 14%
y-y (IPD revenue growth) (RHS) y-y (OPD revenue growth) (RHS)
26,000 12%
3,200 12%
25,500 10%
3,100
25,000 8% 10%
24,500 6% 3,000
8%
24,000 4% 2,900
23,500 2% 6%
2,800
23,000 0% 4%
2,700
22,500 -2%
2,600 2%
22,000 -4%
21,500 -6% 2,500 0%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Source: Company data, Nomura estimates Source: Company data, Nomura estimates
Fig. 80: Insurance revenue has been growing strongly Fig. 81: Increasing exposure to insurance
BDMS: Revenue from insurance patients (THB mn) BDMS: Revenue contribution
102
Nomura | Bangkok Dusit Medical Services 14 June 2018
Fig. 83: BDMS: 3-year forward P/E band Fig. 84: BDMS: 3-year forward EV/EBITDA band
25 15
Jun 15
Dec 16
Dec 17
Dec 15
Jun 16
Jun 17
Jun 18
Sep 15
Sep 16
Sep 17
Mar 16
Mar 17
Mar 18
Jun-17
Jun-15
Jun-16
Jun-18
Sep-15
Dec-15
Sep-16
Dec-16
Sep-17
Dec-17
Mar-16
Mar-17
Mar-18
103
Raffles Medical RAFG.SI RFMD SP
Catalysts: Further expansion in China; stake sale in Chongqing hospital Nomura vs consensus
Larger-than-expected start-up losses at the China hospitals would be a Our FY18F profit estimate is 9%
negative while a stake sale in the Chongqing hospital would be a positive. below consensus as we expect
Valuation: Reduce target price to SGD1.20, implying 13.2% upside limited impact on the profitability
from the Raffles Hospital
We largely maintain our FY18F revenue estimate, but reduce our FY19F
extension coming on line in
estimate by 2.9% due to the lower growth in revenue intensity. As cost
FY18F.
pressure ramps up due to the company’s expansion into China, we reduce our
FY18F and FY19F net profit estimates by 4.8% and 10%, respectively. We Research analysts
use sum-of-the-parts analysis to value the company: 1) we value the core
business at FY19F EV/EBITDA of 18x; and 2) China hospitals are valued Healthcare/Pharmaceutical
using DCF. Our new TP of SGD1.20 implies 13.2% upside, for a target FY18F
Raghavendra Divekar, CFA - NSC
P/E of 36x. The company trades at 32x FY18F P/E (EPS: 0.03), 5% below its raghavendra.divekar@nomura.com
historical average of 34x. We prefer IHH Healthcare (IHH MK, Buy). +81 3 6703 1229
Key company data: See next page for company data and detailed price/index chart.
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Raffles Medical 14 June 2018
105
Cyberdyne 7779.T 7779 JP
Sales (mn) 1,727 4,520 7,320 10,880 Japan pharmaceuticals & healthcare
Rec profits (mn) -689 -80 1,400 3,430 Kyoichiro Shigemura - NSC
EPS -2.7 -0.2 4.2 10.3 kyoichiro.shigemura@nomura.com
+81 3 6703 1118
P/E (x) N/A N/A 322.1 131.2
EV/EBITDA (x) N/A 898.6 151.0 70.3
P/B (x) 6.4 6.3 6.2 5.9
Dividend yield (%) 0.0 0.0 0.0 0.0
Source: Company data, Nomura estimates
Key company data: See next page for company data, and detailed price/index chart.
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Cyberdyne 14 June 2018
Income statement
(JPYmn) 18/3 19/3E 20/3E 21/3E
Sales 1,727 4,520 7,320 10,880
Operating profits -1,018 -540 940 2,970
EBITDA -622 310 1,840 3,930
Interest & dividend income 12 10 10 10
Interest expense 1 0 0 0
Recurring profits -689 -80 1,400 3,430
Pretax profits -589 -80 1,400 3,430
Minority interest -3 - - -
Profits attributable to
-591 -50 900 2,210
owners of the parent
(Equity in net income of
-42 - - -
affiliates)
Source: ThomsonReuters, Nomura research
Balance sheet
Performance
(JPYmn) 18/3 19/3E 20/3E 21/3E
(%) 1M 3M 12M Current assets 31,806 32,936 34,636 37,531
Absolute -3.6 -12.2 -9.3
Operating receivables 363 700 1,100 1,600
Relative to Russell/Nomura
-3.2 -16.0 -20.5 Inventories 565 800 1,400 2,000
Large Cap
Long-term assets 14,533 15,200 16,000 16,900
Total assets 46,339 48,136 50,636 54,431
Operating payables
53 300 400 400
Stock price data (Current)
Current stock price (JPY) 1,348 Interest-bearing debt 0 0 0 0
Total liabilities 709 2,456 4,056 5,641
Market capitalization (JPY bn) 185.1
Net assets 45,630 45,680 46,580 48,790
52-week low stock price (JPY) 1,307 Shareholders’ equity 45,559 45,680 46,580 48,790
52-week high stock price (JPY) 2,150
Shares out (mn) 137.3
Cash flow statement
Source: ThomsonReuters, Nomura research
(JPYmn) 18/3 19/3E 20/3E 21/3E
Operating cash flow -53 1,925 2,350 3,520
Profits attributable to
-591 -50 900 2,210
owners of parent
Depreciation 396 850 900 960
Change in working capital -122 -325 -900 -1,100
Investment cash flow -2,483 -1,517 -1,700 -1,774
Capex -1,070 -1,350 -1,500 -1,650
Free cash flow -2,536 408 650 1,746
Financial cash flow -23 100 0 0
Change in interest-bearing
0 0 0 0
debt
Dividend payment 0 0 0 0
Change in cash &
-2,555 508 650 1,746
equivalents
Source: Company data, Nomura estimates
107
Nomura | Cyberdyne 14 June 2018
Valuation methodology
We derive our target price of ¥3,300 using a DCF model with a forecast period through to
38/3 that assumes WACC of 8.1% and terminal growth of 0%.
Risks to our view
Risk factors that could result in the share price significantly underperforming our target
price include delays in the introduction of HAL, slow progress in the use of the equipment
in medical institutions owing to delays in insurance eligibility, and weak uptake of HAL by
institutions owing to changes in the budgets of medical institutions and long-term care
facilities. In addition, a move into the black at the recurring level could be delayed if
subsidies and grants for contract work are reduced owing to a lack of progress in
securing sufficient development and sales staff.
108
Ship Healthcare Holdings
3360.T 3360 JP
EQUITY: JAPAN PHARMACEUTICALS
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Ship Healthcare Holdings 14 June 2018
Income statement
(JPYmn) 18/3 19/3E 20/3E 21/3E
Sales 425,566 444,600 465,900 491,700
Operating profits 18,259 18,800 21,200 23,700
EBITDA 22,794 23,335 25,735 28,235
Interest & dividend income 425 425 425 425
Interest expense 254 254 254 254
Recurring profits 18,935 19,550 21,950 24,450
Pretax profits 17,413 19,550 21,950 24,450
Minority interest 138 160 180 200
Profits attributable to
10,350 11,770 13,210 14,710
owners of the parent
(Equity in net income of
34 40 40 40
affiliates)
Source: ThomsonReuters, Nomura research
Balance sheet
Performance
(JPYmn) 18/3 19/3E 20/3E 21/3E
(%) 1M 3M 12M Current assets 193,488 206,419 221,319 238,819
Absolute 12.5 12.8 29.8
Operating receivables 102,517 103,700 108,700 114,700
Relative to Russell/Nomura
13.0 9.1 18.7 Inventories 14,950 14,800 15,500 16,400
Large Cap
Long-term assets 91,950 92,741 93,341 93,841
Total assets 285,438 299,160 314,660 332,660
Operating payables
110,502 118,600 124,200 131,100
Stock price data (Current)
Current stock price (JPY) 4,220 Interest-bearing debt 44,411 41,735 40,735 39,735
Total liabilities 183,082 188,635 194,935 202,735
Market capitalization (JPY bn) 214.5
Net assets 102,354 110,525 119,725 129,925
52-week low stock price (JPY) 3,220 Shareholders’ equity 99,880 108,051 117,251 127,451
52-week high stock price (JPY) 4,235
Shares out (mn) 50.8
Cash flow statement
Source: ThomsonReuters, Nomura research
(JPYmn) 18/3 19/3E 20/3E 21/3E
Operating cash flow 20,204 21,121 16,924 18,424
Profits attributable to
10,350 11,770 13,210 14,710
owners of parent
Depreciation 2,514 2,514 2,514 2,514
Change in working capital 1,950 7,065 -100 0
Investment cash flow -6,640 -3,371 -3,214 -3,114
Capex -6,371 -4,000 -4,000 -4,000
Free cash flow 13,564 17,750 13,710 15,310
Financial cash flow -3,347 -6,274 -5,010 -5,510
Change in interest-bearing
1,495 -2,676 -1,000 -1,000
debt
Dividend payment -3,035 -3,238 -3,593 -4,048
Change in cash &
10,126 11,550 8,698 9,808
equivalents
Source: Company data, Nomura estimates
110
Nomura | Ship Healthcare Holdings 14 June 2018
Valuation methodology
We use the Russell/Nomura Large Cap Index (ex financials) as our benchmark as
comparisons with the healthcare sector are difficult owing to the distinctiveness of the
company’s business model, which includes hospital remodeling for example, even
relative to other healthcare services providers. We use a fair-value P/E of 21x, higher
than the benchmark average of 15x on 19/3 forecasts, as our CAGR forecast for profits
attributable to owners of the parent of 13% through 20/3 is higher than the benchmark
figure of 5%, and applying this to our 19/3 EPS forecast of ¥233 yields a target price of
¥4,900.
Risks to our view
Potential risk factors include a worsening of Ship Healthcare Holdings' earnings as a
result of cuts in medical service fee reimbursements or other factors that would
undermine the operating environment for medical institutions, and a reduced appetite for
capital expenditure on medical equipment replacement. Another potential risk is delays
in handovers of TPP segment projects.
111
M3 2413.T 2413 JP
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | M3 14 June 2018
Key data on M3
Rating Valuation and ratio analysis
Stock Buy (JPY) 18/3 19/3E 20/3E 21/3E
EPS 60.8 66.1 82.5 105.4
BPS or NAV per share 253.9 308.5 391.0 496.3
Relative performance chart
DPS 11.0 0.0 0.0 0.0
ROE (%) 26.3 23.5 23.6 23.7
Income statement
(JPYmn) 18/3 19/3E 20/3E 21/3E
Sales 94,471 115,600 139,400 165,900
Operating profits 29,713 35,200 41,800 52,500
EBITDA 30,874 36,000 42,600 53,300
Interest & dividend income 41 40 40 40
Interest expense 54 20 20 20
Recurring profits - - - -
Pretax profits 29,700 35,220 41,820 52,520
Minority interest 1,200 2,200 2,300 2,400
Profits attributable to
19,684 21,420 26,720 34,120
owners of the parent
(Equity in net income of
30 100 200 300
affiliates)
Source: ThomsonReuters, Nomura research
Balance sheet
Performance
(JPYmn) 18/3 19/3E 20/3E 21/3E
(%) 1M 3M 12M Current assets 53,596 71,010 103,940 143,870
Absolute 4.4 1.8 48.3
Operating receivables 24,902 30,090 35,820 42,070
Relative to Russell/Nomura
4.9 -2.0 37.2 Inventories - - - -
Large Cap
Long-term assets 62,845 62,800 64,090 65,480
Total assets 116,441 133,810 168,030 209,350
Operating payables
12,631 15,460 18,640 22,180
Stock price data (Current)
Current stock price (JPY) 4,590 Interest-bearing debt 0 0 0 0
Total liabilities 31,273 31,000 38,300 45,300
Market capitalization (JPY bn) 1,486.7
Net assets 85,167 102,810 129,730 164,050
52-week low stock price (JPY) 2,736 Shareholders’ equity 82,484 99,910 126,630 160,750
52-week high stock price (JPY) 4,975
Shares out (mn) 323.9
Cash flow statement
Source: ThomsonReuters, Nomura research
(JPYmn) 18/3 19/3E 20/3E 21/3E
Operating cash flow 15,913 15,651 26,900 33,280
Profits attributable to
19,684 21,420 26,720 34,120
owners of parent
Depreciation 1,161 800 800 800
Change in working capital -3,465 -2,359 -2,550 -2,710
Investment cash flow -7,281 -1,000 -1,000 -1,000
Capex -1,385 -1,000 -1,000 -1,000
Free cash flow 8,632 14,651 25,900 32,280
Financial cash flow -4,761 -3,563 0 0
Change in interest-bearing
0 0 0 0
debt
Dividend payment -3,238 -3,563 0 0
Change in cash &
3,636 11,088 25,900 32,280
equivalents
Source: Company data, Nomura estimates
113
Nomura | M3 14 June 2018
Valuation methodology
We obtain our target price of ¥5,500 via an 11-year DCF model through 29/3 that
assumes WACC of 5.4% and terminal growth of 0%.
Risks to our view
Major downside risks to our target price include (1) failure to secure the necessary
human resources, (2) slower-than-expected development of clinical trial, CSO, and other
businesses, (3) declining sales in the MR-kun business due to changes in sales
promotion strategies at pharmaceutical companies and other factors, (4) higher costs at
clinical trial-related businesses due to delays in recruiting patients and extended trial
monitoring periods, and (5) slower-than-expected business expansion due to regulatory
conditions in new overseas markets.
114
Secom 9735.T 9735 JP
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Secom 14 June 2018
Income statement
(JPYmn) 18/3 19/3E 20/3E 21/3E
Sales 970,624 1,019,700 1,038,600 1,063,600
Operating profits 135,448 131,900 149,300 158,900
EBITDA 196,771 193,223 210,623 220,223
Interest & dividend income 1,620 1,700 1,730 1,770
Interest expense 1,210 1,220 1,260 1,260
Recurring profits 144,318 141,300 158,800 168,600
Pretax profits 144,245 141,300 158,800 168,600
Minority interest 11,755 12,255 12,755 13,255
Profits attributable to
86,993 85,245 97,645 104,745
owners of the parent
(Equity in net income of
6,398 6,720 6,840 7,000
affiliates)
Source: ThomsonReuters, Nomura research
Balance sheet
Performance
(JPYmn) 18/3 19/3E 20/3E 21/3E
(%) 1M 3M 12M Current assets 806,746 874,645 944,645 1,017,545
Absolute -0.3 8.1 -1.4
Operating receivables 129,984 141,300 143,900 147,300
Relative to Russell/Nomura
0.1 4.3 -12.5 Inventories 22,144 31,500 32,100 32,900
Large Cap
Long-term assets 913,522 927,900 938,600 950,000
Total assets 1,720,268 1,802,545 1,883,245 1,967,545
Operating payables
43,929 48,300 49,200 50,400
Stock price data (Current)
Current stock price (JPY) 8,262 Interest-bearing debt 77,230 79,000 82,100 83,200
Total liabilities 639,054 663,545 675,245 687,545
Market capitalization (JPY bn) 1,927.4
Net assets 1,081,213 1,139,000 1,208,000 1,280,000
52-week low stock price (JPY) 7,435 Shareholders’ equity 952,623 1,004,000 1,066,000 1,131,000
52-week high stock price (JPY) 9,118
Shares out (mn) 233.3
Cash flow statement
Source: ThomsonReuters, Nomura research
(JPYmn) 18/3 19/3E 20/3E 21/3E
Operating cash flow 123,625 134,353 156,204 163,404
Profits attributable to
86,993 85,245 97,645 104,745
owners of parent
Depreciation 56,459 56,459 56,459 56,459
Change in working capital -10,982 -16,301 -2,300 -3,000
Investment cash flow -58,202 -71,546 -67,459 -68,159
Capex -87,384 -54,700 -54,700 -54,700
Free cash flow 65,423 62,807 88,745 95,245
Financial cash flow -50,950 -33,464 -33,645 -39,745
Change in interest-bearing
-6,854 1,770 3,100 1,100
debt
Dividend payment -32,739 -33,830 -36,059 -39,058
Change in cash &
14,843 80,538 63,800 65,000
equivalents
Source: Company data, Nomura estimates
116
Nomura | Secom 14 June 2018
Valuation methodology
Our ¥10,000 target price is derived from a DCF model based on a 9-year forecast period
through 27/3 and assumes a WACC of 6.0% and terminal growth of 0%.
Risks to our view
We identify the following as risks that could cause the share price to sharply undershoot
our target price: a deterioration in earnings owing to lower corporate demand for
electronic security services or increased pressure from customers to lower prices in the
event that security budgets are cut at Japanese companies due to an overall downturn in
earnings. Another risk we see is a potential decline in contract numbers due to the
closure of outlets at financial institutions and retailers.
117
Nomura | Asia Pacific hospitals 14 June 2018
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Nomura | Asia Pacific hospitals 14 June 2018
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Nomura | Asia Pacific hospitals 14 June 2018
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Nomura | Asia Pacific hospitals 14 June 2018
Appendix A-1
Analyst Certification
Each research analyst identified herein certifies that all of the views expressed in this report by such analyst accurately reflect
his or her personal views about the subject securities and issuers. In addition, each research analyst identified in this report
hereby certifies that no part of his or her compensation was, is, or will be, directly or indirectly related to the specific
recommendations or views that he or she has expressed in this research report, nor is it tied to any specific investment banking
transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
Issuer Ticker Price Price date Stock rating Previous rating Date of change Sector rating
M3 2413 JP JPY 4,695 12-Jun-2018 Buy Neutral 24-Jan-2012 N/A
Ship Healthcare Holdings 3360 JP JPY 4,195 12-Jun-2018 Buy Not Rated 06-Jan-2009 N/A
Cyberdyne 7779 JP JPY 1,430 12-Jun-2018 Buy Not Rated 30-Apr-2014 N/A
Secom 9735 JP JPY 8,340 12-Jun-2018 Buy Not Rated 06-Jan-2009 N/A
Bangkok Dusit Medical
Services BDMS TB THB 25.50 12-Jun-2018 Buy Neutral 08-Mar-2018 N/A
Bumrungrad Hospital BH TB THB 191.50 12-Jun-2018 Buy Neutral 05-Mar-2018 N/A
Fortis Healthcare FORH IN INR 140 12-Jun-2018 Neutral Buy 29-Jun-2017 N/A
IHH Healthcare Bhd IHH MK MYR 6.10 12-Jun-2018 Buy Neutral 14-Jun-2018 N/A
Metro Pacific Investments MPI PM PHP 5.05 11-Jun-2018 Buy Not Rated 14-Feb-2017 N/A
Raffles Medical RFMD SP SGD 1.05 12-Jun-2018 Neutral Buy 27-Nov-2017 N/A
Siloam International
Hospitals SILO IJ IDR 6,225 08-Jun-2018 Buy Reduce 22-Nov-2017 N/A
IHH Healthcare Bhd: Valuation Methodology We value the company on the sum of its parts: 1) the hospital business in
Singapore, Malaysia, Turkey and India at 18x FY19F EV/EBITDA; 2) IMU Health at 14x FY19F EV/EBITDA; 3) equity stakes in
healthcare companies at market value; 4) hospital projects in Greater China using DCF. Adding these parts derives our TP of
MYR7.10. The benchmark index for this stock is MSCI Malaysia.
IHH Healthcare Bhd: Risks that may impede the achievement of the target price Downside risks: 1) depreciation of the
Turkish Lira against the MYR; 2) change in the regulatory environment; 3) execution risk; and 4) a decline in medical tourists to
Singapore as the SGD strengthens against local currencies.
Raffles Medical: Valuation Methodology We use SOTP valuation for RFMD: 1) we value the company's core business, which
consists of Raffles Hospital and its clinics in Singapore, Shanghai and Hong Kong, at FY19F EV/EBITDA of 18x, in line with
regional peers; 2) we value the China hospital projects using a DCF approach, with a WACC of 7%. Adding these two parts, we
get a target price of SGD1.20. The benchmark index for this stock is the MSCI Singapore.
Raffles Medical: Risks that may impede the achievement of the target price Key upside risks: 1) Faster-than-expected
break-even of China projects; and 2) continued improvement in the Singapore economy. Key downside risks: 1) further decline
in medical tourists; and 2) delay in China projects.
121
Nomura | Asia Pacific hospitals 14 June 2018
Important Disclosures
Online availability of research and conflict-of-interest disclosures
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The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a
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FINRA Rule 2241 restrictions on communications with covered companies, public appearances, and trading securities held by a r esearch
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STOCKS
A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral',
indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that
the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target
price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies
that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage. Investors should not expect continuing or
additional information from Nomura relating to such securities and/or companies. Benchmarks are as follows: United States/Europe/Asia ex-
Japan: please see valuation methodologies for explanations of relevant benchmarks for stocks, which can be accessed at:
http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx; Global Emerging Markets (ex-Asia): MSCI
Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology; Japan: Russell/Nomura Large Cap.
SECTORS
A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance,
indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates that
the analyst expects the sector to underperform the Benchmark during the next 12 months. Sectors that are labelled as 'Not rated' or shown as
'N/A' are not assigned ratings. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging
Markets (ex-Asia): MSCI Emerging Markets ex-Asia. Japan/Asia ex-Japan: Sector ratings are not assigned.
Target Price
A Target Price, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part the analyst's
estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and
by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.
122
Nomura | Asia Pacific hospitals 14 June 2018
Disclaimers
This publication contains material that has been prepared by the Nomura Group entity identified on page 1 and, if applicable, with the
contributions of one or more Nomura Group entities whose employees and their respective affiliations are specified on page 1 or identified
elsewhere in the publication. The term "Nomura Group" used herein refers to Nomura Holdings, Inc. and its affili ates and subsidiaries including:
Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan; Nomura International plc ('NIplc'), UK; Nomura Securities International, Inc. ('NSI'), New York,
US; Instinet, LLC ('ILLC'); Nomura International (Hong Kong) Ltd. (‘NIHK’), Hong Kong; Nomura Financial Investment (Korea) Co., Ltd. (‘NFIK’),
Korea (Information on Nomura analysts registered with the Korea Financial Investment Association ('KOFIA') can be found on th e KOFIA
Intranet at http://dis.kofia.or.kr); Nomura Singapore Ltd. (‘NSL’), Singapore (Registration number 197201440E, regulated by the Monetary
Authority of Singapore); Nomura Australia Ltd. (‘NAL’), Australia (ABN 48 003 032 513), regulated by the Australian Securities and Investment
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