From: Business Today, July 2009.
The Board of Directors and the senior management team of KPJ Healthcare Berhad (KPJ) are surprisingly upbeat in this current economic slowdown. And with good reason. The group has been making nothing but positive headlines in the media over the last few months.
Reports thus far indicate KPJ steadily gaining market traction for the year, while opening new hospitals and receiving calls to expand overseas is a frequent occurrence. Plans are also underway to boost its take on health tourism.
All this certainly does reveal the sort of splash KPJ intends to make for 2009 even as many industries still reel from the effects of the economic shock-wave. Even KPJ's Board of Directors believes the healthcare industry will generally experience positive growth. As such, it already has in its pipeline to expand facilities and services in both its local and overseas operations to seize this growth opportunities.
Taking advantage of these bad times with smart investments, KPJ is best positioned to meet the medical needs of today. After all, medical care is an important social need.
"Right now, we are experiencing a repeat performance of the situation we had during the Asian Financial Crisis of 1997/98. Back then, Malaysia was the place of choice to go for surgeries since we offer top class services at a considerably affordable price. In a way, it does reflect how resilient we are during such times," says Datin Paduka Siti Sa'diah Sheikh Bakir, Managing Director of KPJ.
The Secret of Success
What are it then that makes KPJ a successful and long-lasting brand? Surely not just its hospitals and healthcare facilities; as Siti Sa'diah puts it: "It's more than that!"
Through the course of its 28-year history, KPJ has done what no other hospital group has managed to achieve: be publicly listed on the Main Board of Bursa Malaysia (November 1994) and exposing its property assets to REIT (Real Estate Investment Trust) funds (in 2006). truly landmark events for KPJ, it is also a first for any local hospital and medical service organisation to achieve.
"Being the first home-grown health-care group in Malaysia to be listed on the Main Board is unprecedented. That decision has seen tremendous results and enhanced our business profile.
"However, our introduction into REITs toppled that achievement. It's the best thing that has ever happened to us! With REITs, KPJ is able to transform and be more aggressive in our operations. We considered this avenue when we saw the potential REITs have to offer back in 2005. Once we got the approval in 2006, we made the move to embark into this new area of investments," remarks Siti Sa'diah, with contained excitement.
Using REITs, KPJ has unlocked the core value of its assets, allowing it to go on a large expansion and acquisition spree, implement skill development, enhance services, and improve overall brand marketing. Accomplishing that, everything else, as they say, is history. Siti Sa'diah believes that making these decisions have certainly paid off for KPJ since it successfully generated enough capital to do so much more with its core business.
"To be able to do this much since our inception as a hospital is quite amazing. We never thought we'd grow so big. However, it is certainly an eventful journey for us and I must say, it's been quite an experience," she adds.
Such statements are considerably humble for someone who has seen KPJ grow from a medical service provider to a mighty business conglomerate and a champion of the healthcare sector.
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Datin Paduka Siti Sa'diah Sheikh Bakir, Managing Director of KPJ Healthcare
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The Journey So Far
Established and bred from the ground up locally, KPJ is, first and foremost, a hospital group of the utmost quality. Having opened more than 20 hospitals and private healthcare specialists, which are part of its 42 subsidiary and associate companies, it is the largest health-care enterprise in Malaysia.
Its portfolio of medical services include hospital management, healthcare
Using REITs, KPJ has unlocked the core value of its assets, allowing it to go on a large expansion and acquisition spree, implement skill development, enhance services, and improve overall brand marketing.
Technical services, hospital development and commissioning, nursing, health sciences and continuous professional healthcare education, pathology services, and central procurement.
According to Siti Sa'diah, of the 42 affiliates KPJ has, a handful of them are located in places like Indonesia, Bangladesh and Saudi Arabia. Additionally, there are also some non-medical businesses under its umbrella. This includes labs, Pharmaceuticals and education.
"They all became a part of us during KPJ's various growth phases. From our inception and development stage, to the strengthening period, and then through the consolidation/integration process, to our current transformation juncture, the group has grown so much over the years. It is during the fourth stage that our revenue (for 2007) crossed the RM1 billion marks. Not a feat many local companies live to see really," she says with a touch of pride.
Being the adept strategist that she is, Siti Sa'diah is very confident that KPJ is capable of achieving many more feats. "What we have done so far has motivated us to do more for the Malaysian public-at-large and for the nation as a whole," she exclaims.
Industry Potential
Health tourism is gaining popularity now, but KPJ is notably one of its earliest advocators. In fact, Siti Sa'diah reveals that the group cashed in on its first mover advantage in developing this high potential market segment.
"When we first started in this area, it was not really that big to begin with. Even so, we managed to capture a sizeable market share somehow," she muses.
KPJ's objectives, when it started many years ago, were very different. The goal back then was to stem the large outflow of local patients and doctors to other countries for treatments and work respectively. This draining trend, Siti Sa'diah feels, has to be undone.
"It's different now. With our economy and infrastructure being able to rival world-class facilities of the developed world, many have considered investing their time and money here. Our fundamentals are solid, we are competitively priced and have the advantage of being a cultural melting pot.... We can even meet any demand the expatriates may have. These are the elements that serve to encourage many locals to opt for our medical services here. And of course, we also draw in a lot of interest from overseas," Siti Sa'diah explains.
This interest is mostly generated from the high number of expatriates working and living in Malaysia now. These expatriates prefer to have their treatments done over here, and have been spreading the good word about Malaysia's medical capabilities.
KPJ took notice of this and started marketing itself to this swiftly budding market. This is how medical tourism took centre stage, immediately drawing the interest of other large private hospitals and healthcare services. Siti Sa'diah impishly notes that once the other industry players realised the potential behind this new growth sector, they quickly moved to focus on marketing to this area.
"The biggest draw (of patient admission) consists of two groups: the Far East and the Middle East. In fact, the Middle East, followed closely by the Koreans and the Japanese, take the top three ranks in demand for Malaysian health tourism," she adds. Besides the last Asian economic cri-sis, other world issues, such as the 9/11 incident and the subsequent wars in the Middle East, play in Malaysia's favour as it drives the Arabs to consider other avenues for healthcare and medical services outside of the US.
Given the amount of attention Malaysia is getting for its medical tourism industry, it comes as no surprise that it ranks in the top five as a tourist destination for healthcare. According to NuWire Investor, an alternate investment news web portal, Malaysia ranks third on its Top Five Medical Tourism Destinations.
This proves how popular this nation really is for such services. Further reiterating this is the projected growth numbers that the Association of Private Hospitals Malaysia announced recently: a whopping 30% increase year-on-year from 2006 until 2010.
Says Siti Sa'diah: "Such growth potential is a real opportunity for Malaysia to capture a larger market share. Even during gloomy times, I am sure we can make it somehow. It's like the Chinese saying: when there is a threat, opportunities are bound to follow close by. And I truly believe that Malaysia is able to take advantage of it somehow."
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Datin Paduka Siti Sa'diah Sheikh Bakir, while giving interview.
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Future Plans
Confident Siti Sa'diah may be, but fool-hardy she is not. While she is certain of Malaysia's growth potential for the health tourism industry, she also adds a word of caution to the general recovery prospects of the world's financial turmoil.
"Every business institution, private or otherwise, is not spared of the world's problems. They are affected in one way or another. Some may delay their surgery or cut down on their health plan because of this. This cannot be helped and it will certainly lower our revenues. Even so, we've to always maintain our quality of service and to look beyond this as we continue with our progress to improve the industry," she notes, full of determination.
As the world now recognizes Malaysia's healthcare industry as comparable to the First World countries, it now places a high demand for Malaysia's health tourism services. This makes it imperative that the healthcare sector here upholds its level of high performance.
Besides that, KPJ is also looking to do more. In expanding its operations, KPJ is building new hospitals, expanding the size of existing ones, strengthening its human capital, and even moving into new areas of specialisation. The plan is to spend RM100 million for every new hospital or building, increase the capital expenses to about RM40 - RM50 million, and construct new Tawakal medical facilities for suburban and rural towns.
Even as KPJ does all this, it continues to ply foreign markets for its health tourism offerings. In fact, Siti Sa'diah knows more can be done and hopes to see some concerted action being taken by the industry and the government of the day to advance the industry.
"Now that trade borders are opening up soon, we need to strengthen our profile. That is the pre-requisite that needs to be addressed if health tourism is to really take off here. KPJ can only do so much with the resources at hand, so the responsibility to drive the industry forward must fall on the government and its affiliates. They have the resources and necessary means to take up the cause, and by all accounts, they should. "We've so many tourists coming here thanks to our government's efforts. So why not push for health tourism as well!
As the world now recognizes Malaysia s healthcare industry as comparable to the First World countries, it now places a high demand for Malaysia's health tourism services.
They can go around and be the facilitators for this high growth sector. Maybe even push some of the up-market services that we offer. Essentially create a niche area for us to focus on. They should be doing that!" she forces out.
If the government follows through with any of her suggestions and boosts its support for health tourism, it can potentially be the most highly sought destination the world over. Siti Sa'diah predicts that Malaysia may even become the top player for the region. Even now, KPJ aims to hit another RM1 billion in the next five years and wants to drive up the standards of the entire healthcare industry to whole new levels.
Having enough foresight and good business acumen, Siti Sa'diah's vision is no longer a far-fetched ideal. Her goal to make KPJ the biggest in the industry and the best in the world may become a reality sooner than anyone can imagine. That would certainly be a true testament of her commitment to the healthcare industry.
Quick Facts
• KPJ is one of Malaysia's largest healthcare group to date and is the only publicly listed medical providers in the country
• Through its efforts, it holds more than RM1.1 billion in assets, has an excess of RM508.9 million in shareholders' funds, and around RM207.8 million in paid up capital
• In 2008 alone, it has served over 2 million outpatients and 200,000 in-patients.
• KPJ's ultimate goal is to put Malaysia on the world map as a burgeoning hub for healthcare and medical services.
• KPJ is also one of the few healthcare groups to have major facilities located outside Malaysia and is involved with international joint-ventures to improve its overseas operations.
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