Cengild Medical Berhad (“Cengild”) is set to be listed on Bursa Malaysia’s ACE Market on April 18 under an initial public offering (IPO) of 218.8 million new shares in the company at 33 sen each to raise RM72.2 million. 

If you are looking at Cengild with interest, here are 9 things to know before you invest.

1. Business overview

Cengild is a healthcare service provider operating a medical centre at Nexus @ Bangsar South, Kuala Lumpur. It specializes in the diagnosis and treatment of gastrointestinal and liver diseases, and obesity.

The medical centre has ten (10) clinics, three (3) endoscopy rooms, twenty-eight (28) beds and two (2) operating theatres, radiology department, accident and emergency department, pharmacy, laboratory and central sterile supply department. It has six (6) employee consultants, five (5) resident consultants, seventeen (17) visiting consultants and four (4) medical officers. 

The company’s team of consultants provide tertiary care subspecialized advance endoscopic services, gastrointestinal and general surgeries, gynaecological and urological endoscopy services and surgeries, supported by cardiologists.

Cengild’s principal market is in Malaysia. The majority of its patients are local patients contributing 96.8% of its revenue for the financial year ended (FYE) 30 June 2021, while the remaining 3.2% are contributed by foreign patients. 

Cengild’s business activities can be summarized in the diagram below. 

(Source: Draft IPO prospectus)

Cengild’s business activities comprise the following:

  • Consultant services on gastrointestinal and liver diseases
  • Medical management services supporting consultant services with facilities available at its medical centre to provide care and comprehensive medical treatments for its patients.
    • Nursing services – provision of care to patients when admitted to a medical centre; assists consultants during various medical procedures.
    • Clinical support services – complement and support consultants, including pharmacy, maintain medical records, dietician, physiotherapy, laboratory testing, special diagnostics, and radiology.  

2. Competitive strengths 

Cengild lists its competitive strengths as follows. 

  • Unique value proposition as the only independent full-fledged medical centre in Malaysia specializing in gastrointestinal and liver diseases, and obesity. Specialisation within a single discipline enables the medical centre to be cost effective and to provide in-depth and more targeted diagnostic services and treatments, and to undertake complex procedures and surgeries related to gastroenterology and liver diseases, and obesity.
  • Reputable and experienced team of consultants supported by nursing staff and clinical support staff. Each of its employee consultants has at least 20 years and up to 41 years of experience in the medical field. 
  • Modern equipment and facilities. Its operating theatres are fully equipped to perform procedures ranging from keyhole surgery to open surgery. Other facilities include a radiology department which is equipped with facilities such as CT scanner, ultrasonography, fluoroscopy, and angiography equipment to assist its consultants to carry out all the relevant procedures for its patients. There is also an in-house laboratory that allows analysis of blood and urine samples. 
  • Wide range of insurance and corporate panels. By partnering with them, insurance-covered patients are able to receive treatment at its medical centre via cashless facility in the form of guarantee letters from the insurance companies and third party administrators. Moreover, as the company is on the corporate panel for insurance companies and third party administrators, the company is able to expand services to employees of corporations who have corporate healthcare insurance. 
  • Provision of complementary healthcare services that support core specialties, such as urology, oncology, cardiology, and gynaecology, as well comprehensive on-site laboratory services, 24-hour accident and emergency services, health screening, physiotherapy, dietetic and inpatient services.  

3.  Future plans and strategies

Cengild’s future plans and strategies are as follows:

  1. Expansion of existing medical centre: leasing new space to cater to current and future demand for its medical services, especially endoscopic procedures; renovation and purchase of necessary medical furniture, devices and equipment. 
  1. Geographical expansion: Establishing two (2) medical centres in other major cities in Malaysia.
  1. Expansion of medical team: Attracting and recurring consultants and surgeons in the areas of gastroenterology and hepatology. 

4. Utilisation of proceeds 

Cengild expects to use the total estimated gross proceeds raised of RM72.2 million in the following manner.

(Source: Draft IPO prospectus)

5.  Risk factors

The key risk factors are as follows.

  1. Highly dependent on its employee consultants. Contributions by its employee consultants to the company revenue are 76.9%, 87.1%, 86.7% and 84.6% for the FYE 30 June 2018 to FYE 30 June 2021 respectively. The loss of any of the employee consultants, without suitable and timely replacement, or the inability to attract, hire and retain suitable candidates as employee consultants, may negatively affect its business operations and future prospects. 
  1. Short operating history with operation. Cengild currently operates at a single medical centre, which commenced operations in 2017. Due to the short operating history, its medical centre may not be well known to the general public. Moreover, any damage to or destruction of, any of its medical equipment and facilities arising from any adverse events may disrupt its operations and prevent the company from providing healthcare services.

6. Dividend policy 

Cengild targets a dividend payout ratio of at least 25% from its consolidated net profit attributable to the owners of the company, excluding exceptional items, for each financial year, after taking into account its financial performance, cash flow requirements and capital expenditure plans.   

7. Promoters and substantial shareholders

The following table sets out the direct and indirect shareholdings of the company’s promoters and substantial shareholders after its IPO. 

(Source: Draft IPO prospectus)

  • Dato’ Dr Tan Huck Joo – Dato’ Dr Tan is Cengild’s Executive Chairman and Medical Director. He is responsible for the clinical governance of the company, and ensuring that all clinical activities undertaken are conducted at the required standard of care. He is also responsible for ensuring the compliance of the medical centre with the relevant statutory and regulatory requirements and the Ministry of Health guidelines are carried out and complied with.  
  • Emeritus Professor Dato’ Dr Goh Khean Lee – As the Head of Medical Advisory Board of the medical centre, he is responsible for the overall clinical practice of the centre. He is also Head of Department, Endoscopy, where he is responsible for the development and implementation of adequate policies and procedures for the department. 
  • Dr Mohamed Akhtar Bin Mohamed Ditali Qureshi – He is Executive Director and Head of Operating Theatre and Central Sterile Supply Department. He is responsible for the development and implementation of adequate policies and procedures of the operating theatre and central sterile supply department. 
  1. Financial Highlights  

(Source: Draft IPO prospectus)

Cengild is a high growth company – revenue has jumped by 39.0% and 62.0% year-on-year in 2020 and 2021; meanwhile profits have soared by 167.8% and 153.2% year-on-year over the same period.  

(Source: Draft IPO prospectus)

In the earlier years, Cengild recorded net current liabilities and high gearing ratio mainly due to the use of cash generated from operations, bank borrowings and shareholders’ advances to fund its capital expenditures. These capital expenditures were mainly renovation of its existing medical centre and purchase of medical equipment. 

Nevertheless, the company’s net current liabilities position has improved to a net current assets position of RM1.7 million as at 30 June 2021 and RM4.9 million as at 31 October 2021. Aggregate cash and bank balances and deposits with financial institutions also increased to RM6.4 million as at 30 June 2021 and RM9.6 million as at 31 October 2021. 

9. IPO valuation  

With an IPO price of RM0.33, Cengild will have a market capitalisation of RM270.2 million, based on enlarged issued share capital of 818.8 million shares upon listing. This translates to a price earnings ratio (PE) of 27.0 times (based on FYE 30 June 2021 profits). 

Typically, I like to stay away from new IPOs to give the company some time to build up a track record as a public company. 

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