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Singapore: Parkway's Big Payoff In High-End Hospitals


Angeli and Anggi Harmaini, 15-month-old Indonesian twins joined at the hip and abdomen, became celebrities of sorts this spring after 10 hours of surgery to separate them. In late May their beaming faces lit up TV screens and newspaper pages across Asia, and the two are expected to return home soon.

While the girls' family is ecstatic at the good news, investors in Newbridge Capital are probably pleased with the starring role played by Singapore's Gleneagles Hospital, where the operation took place. The U.S. private equity group on May 26 paid $188 million for a 26% controlling interest in Parkway Holdings Ltd., the owner of Gleneagles. The deal values Parkway -- which operates high-end hospitals in Singapore, Malaysia, Brunei, India, Vietnam, and soon Shanghai -- at $750 million.

Parkway is Newbridge's first major investment in Singapore. Set up as the Asian private-equity arm of U.S.-based Texas Pacific Group and Blum Capital Partners LP in 1994, it has invested more than $1.7 billion in the region. With $1 billion in profits from its sale in January of Korea First Bank to Standard Chartered Bank, Newbridge has been looking for investments in high-growth areas such as health care. "There is a very significant, growing trend of medical tourism," Tim Dattels, Newbridge's managing director, said in a conference call announcing the purchase. "Singapore is ideally positioned to tap into the growing regional demand for quality health-care services." Dattels says Newbridge plans to continue an expansion started by current Parkway managers, both in the countries where it already operates and also in Hong Kong and China.

FIVE-STAR HEALTH CARE

Investors like the deal. Parkway shares jumped 10% in the days following the announcement. Citigroup Smith Barney expects Parkway to post net income of $34 million on sales of $248 million this year, up from earnings of $31 million and revenues of $231 million in 2004. Next year, profits are forecast to jump by 20%, to $42 million.

Parkway, though, faces intense competition for both medical tourists and local patients. Singapore's public sector hospitals are among the best in the world. And other countries are targeting the same affluent clients that Parkway is. "Parkway's biggest challenge comes from new private hospitals in Thailand and Malaysia," says Goh Han Peng, an analyst for DBS Vickers Securities in Singapore. Parkway Chairman Anil Thadani says he's not worried and likens his hospitals to five-star hotels and says rivals' facilities are "like Holiday Inns." For Newbridge, it's just a matter of keeping those five-star hospitals in a starring role.

By Assif Shameen in Singapore


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