Healthcare companies by Market Cap EV/EBITDA. Market Cap (mills) P/E Ratio Price. Company

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1 Healthcare Providers Outlook Healthcare in Singapore (Neutral) In Singapore, healthcare operates under a 2-tier system. Affordable services are provided by government hospitals, while private hospitals provide additional services. In addition, the state operate under a mandatory contribution scheme, Central Provident Fund, which can be used to subsidize and cover medical costs. Singapore s healthcare industry s income relies on two distinct groups, the local residents as well as medical tourists from the APAC region. However with the recent rise of other regional medical hubs in Malaysia and Thailand, could this affect the prospects of the industry? Lets find out. Company Market Cap (mills) P/E Ratio Price Biosensors 1, Haw Par Corp 1, Riverstone Holdings Eu Yan Sang Healthway Medical Health Management International Healthway Raffles Medical Group 1, Q&M Dental Healthcare companies by Market Cap Healthcare Service Providers 48% R&D 21% Provision of Equipments and Goods 31% EV/EBITDA

2 Industry s Overview Value Chain Research and Development Distributors Health care providers Specialize in discovering solutions. Biopolis and Fusionpolis was built for the purpose of discovering medical advancement. Till date, listed companies such as Hill-Rom has established their Asia headquarters. Degree of Rivalry Barrier to Entry Buyer's Power Medical equipment services provide diagnostic tools to medical service providers and operate within them. Vertical integration with R&D exist for some companies within this value chain. The health care services industry is occupied by both government hospitals and private hospitals. While government hospitals cater to the public at subsidized fees, private hospitals provide more niche services. In addition, they target wealthier customers and might also be an alternative to government hospitals. Porter s Five Buyer s Power Essential products and customers are usually price insensitive. They are also unlikely to switch doctors. Seller s Power Seller s products essential to buyers services and products. Inability to backward integrate. Substitutes Barriers to Entry Degree of Rivalry Other cheaper services such as TCM or cheaper venues overseas for treatments Seller's Power Substitutes High barriers due to established players in the market. Huge capital to build hospitals in order to enter. Each hospital offers a different service and package for customers. However, basic services remain similar.

3 Hospital Bed Crunch In 2012, data from MOH revealed there were a total of 10,756 hospitals beds in the 25 hospitals and specialty centres in Singapore. This number has barely increased and has resulted in a hospital bed crunch in Singapore. This has raised serious questions about Singapore s healthcare, patient safety and adequacy of healthcare infrastructure. With an floating hospital bed occupancy rate of 80% (considered tight by hospital standards), public hospitals are constantly brimming with patients. This figure is only calculated at midnight and does not take into account patients who are discharged the previous afternoon or evening, with new ones admitted in the following operations. Actual figures are expected to be around 90%. To tackle this hospital bed crunch, the government has pledge to increase the number of beds in Singapore by building new hospitals around the island by 2020to alleviate the problem, especially in hard-hit hospitals such as Tan Tock Seng Hospital & Changi General Hospital. Woodlands General Hospital Yishun Community Hospital Sengkang General Hospital Ng Teng Fong Jurong General Hospital Outram Community Hospital

4 Singapore s Aging Population Years 75 Years & Over Coupled with the increased life expectancy of Singaporeans, where new-born Singapore residents could expect to live to 82.3 years, up from the previous years for males and 84.5 for females. Life expectancy at age 65 has also continued to improve, following the same trend as mentioned. Combining the two factors together, we expect local demand to be a strong driver for Singapore s healthcare sector. Government Incentives With an increasing percentage of Singapore s population aged 65 and above, it would be presumed that there additional requirements for healthcare to cater to this increasing demand, as there is a natural correlation between age and healthcare expenditure. This trend is unlikely to break and would seem to drive the local demand for acute, chronic healthcare and follow-up outpatient care. As of November 2013, a new scheme, labeled as Private Medical Insurance Scheme (PMIS) allows residents to use their Medisave savings to buy insurance plans, which covers private hospital bills. This provides additional insurance protection on top of the standard protection offered by Medisave. We feel that this combined with the macro-economic factors of Singapore s environment is a budding ground to encourage expenditure in healthcare in the private sector. We see such a policy will drive demand towards the private healthcare sector

5 Male (0 to 64 yo) Female (0 to 64 yo) Changes in admission 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% Demand for private healthcare has increased for all age groups and for both genders in Singapore. Admission to private healthcare by both male and females have increase gradually over the past 6 years. 5, , , , , Luxury spending ($MM) Change in luxury spending Admissions per specialist (public) Admissions per specialist (private) 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% -4.00% This demand is supported by patients in the age group of 0 to 64 years. This group of people mostly originate from the working class, with the 0 to 25 years age group s spending supported by family members. In 2014, Euromonitor forecasted affuent spending to increase by 12 to 19%. With luxury increase poise to increase, the affluent lifestyle will support the spending in the private healthcare services. Meanwhile, capacity in the private sector is higher than capacity in the public sector. Despite an increase in the capacity in government hospitals over past 6 years, hospitals are still largely understaffed and waiting time remain long. Meanwhile, private hospitals are able handle the patients with their addition capacity and possibly assist government hospitals in their capacity issues.

6 Medical Tourism Medical Tourist is strictly defined as tourists who travelled overseas, for the sole purpose of seeking medical treatment. This definition does not encompass travelers who seek medical treatment during their travel, or wellness seekers for a sabbatical In most countries, medical tourism is handled by private sector. This is because government hospitals are usually mandated to provide affordable and sufficient healthcare to the masses, while private hospitals go for these higher margins and provide better service at a higher premium. In recent years, as quality of healthcare improves in developing countries but yet the price remains relatively cheaper, volume of medical tourists have increased. Increasingly, insurance companies and tour group are including medical tourism in their package. Due to cheaper prices for consumers, medical tourism now serves as an alternative for outbound patients. With healthcare being an essential, the medical tourism has proven to be a defensive sector. 20% Stiff competition in Asia Private CAPEX (3 year average) 30% Revenue Growth (3 year average) 15% 25% 10% 5% 20% 15% 10% 0% Thailand Singapore Malaysia 5% 0% However, despite a booming area and being ranked 6 th in most efficient healthcare system, Singapore is growing at a slower rate compared to its neighbouring countries. Despite similar CAPEX by the private healthcare sector in the region, growth in revenue is lagging behind.

7 Costa Rica 40-65% Savings Turkey 50-65% Savings Thailand 50-70% Savings Taiwan 40-55% Savings Korea 30-45% Savings Mexico 40-65% Savings India 65-90% Savings Malaysia 65-80% Savings Brazil 25-40% Savings Singapore 30-45% Savings * Savings to US Prices This is because neighbouring countries are priced at a higher discount than Singapore. While treatments in Singapore cost 30 to 45% less, it is one of the higher priced in the ASEAN region. A treatment in India can allow twice the savings compared to treatment in Singapore. A survey has shown that medical travelers prioritize cost saving in their considerations, even above other priorities such as reputation and accreditation of hospital facilities. Despite a competitive advantage in a safe environment and recuperation environment, the premium is a huge deciding factor for medical tourists. Importance of these factors Mean Cost 4.56 Reputation of medical s doctor 4.47 Reputation of medical facilities 4.33 Recuperation opportunities 3.83 Accreditation 3.73 Climate of host country 3.26 Returning to home country 2.88 Procedure not available at home 2.34