Dr. Sulaiman Al Habib Group eyes higher market share, says CEO

Dr. Sulaiman Al Habib Medical Group (HMG) aims to boost its local market share, amid the expected growth in population, geographical distribution and the group’s expansion in existing medical projects, as well as and the new ones to be launched in new markets, CEO Nasser Alhuqbani told Argaam in an exclusive interview.

The medical group is planning to open 3 hospitals in Riyadh, southwest and north Jeddah. The new facilities are expected to be finalized over the next 4 years.

The new projects will raise HMG’s current capacity by 62%, equivalent to 1,180 beds, Alhuqbani said.

The group focused on expanding its existing medical projects through introducing various medical services, such as the establishment of excellence centers for fellowships, and expansion of existing hospitals through adding independent buildings to boost clinic and bed capacity in Riyadh and Dubai.

This expansion plan is backed by HMG’s strong track record in the development and operation of various health projects on time. Since inception, the group worked on launching a new medical facility every 29 months in average, and completing construction works in 33 months.

Founding shareholders offered 15% of HMG’s shares to the public, in light of total capital. The offering size will provide the liquidity required for stock trading as 52.5 million shares will be available for trading after debut.

Shareholders are keen to offer promising investment opportunities to local and foreign investors.

The initial public offering (IPO) of HMG aims to boost growth going forward and enhance the group’s governance practices, which have been applicable since 2015.

Alhuqbani added that the IPO saw a strong turnout as investors injected over SAR 217 billion, which in turn reflects their confidence in the Saudi economy and the heath sector, particularly HMG.

Here is the full interview with Nasser Alhuqbani:

Q) Why did HMG offer only 15% of capital to the public on Tadawul?

A) Founding shareholders offered just 15% of HMG’s shares to the public, in light of the group’s total capital. The offering size will provide the liquidity required for trading as 52.5 million shares will be available for trading after debut.

Shareholders are keen to offer promising investment opportunities to local and foreign investors.

The initial public offering (IPO) of HMG aims to boost growth going forward and enhance the group’s governance practices, which came into effect in 2015. It will provide the best international practices to support the group’s operations.

Q) How do you see the IPO coverage ratio by retail and institutional investors?

A) The offering was 8,270%, or 83x subscribed by retail and institutional investors, who bought shares worth over SAR 217 billion. The subscription ratio signals the offering success and investor confidence in the Saudi economy and the heath sector, particularly HMG.

Local investors account for SAR 195.4 billion (74.4 times) including all orders placed by the government institutions, Tadawul-listed companies, privately-owned firms, financial institutions, authorized persons and public funds.

GCC investors account for SAR 10.8 billion (4.1 times) including investment funds, and GCC companies.

Foreign Investors account for SAR 9.0 billion (3.4 times) including qualified foreign investors (QFIs), namely sovereign funds, foreign investment companies and swap agreements.

Retail investors account for SAR 1.9 billion (7.1 times of the offering size, or 0.7 times of total offered shares) were injected by more than 224,000 investors.

Q) What is the reason behind an over 83x subscription ratio for the IPO?

A) The group has several competitive advantages that strengthen its position among healthcare service providers across the region. It offers full-fledged, high-quality medical and technical services. It also has a group of highly-skilled and experienced health practitioners.

The group employs more than 2,085 physicians, with physicians certified by the western medical boards, including USA, UK and Canada accounting for 59% of the total number of physicians working at the group.

The remaining physicians are certified by a number of Arab and Asian medical boards.

Q) What are the medical-related technologies offered by the group?

A) The group invested in advanced medical care technologies to ensure the optimal use of technology to serve patients and improve healthcare quality through the establishment of (1) the telemedicine, (2) the Tele ICU Command Center, which operates around the clock and supervises more than 796 beds of intensive care in the group’s health facilities in the Kingdom, Dubai and Bahrain; (3) the Tele Radiology Center, which links all of the group’s facilities to a diagnostic radiology command center that allows the physician to remotely read the reports and provide fast diagnostic service, highly impacting the quality and speed of medical service; and (4) and the Emergency Command and Control Center, which connects all emergency departments and ambulances with a command and control center.

In addition, HMG provides information technology and systems services through its subsidiary, Cloud Solutions for Communications and Information Technology, which provides cutting-edge technology solutions to serve its customers, improve patient experience, and increase operational efficiency.

It has developed more than 11 specialized technical products to serve the healthcare sector. Nine of such products have been introduced, particularly:

(1) Patient Health Information System(VIDA): It is the first locally-developed integrated electronic health system that meets several international standards and best practices adopted by such organizations as the Healthcare Information and Management Systems Society (HIMSS).

(2) Patients Mobile Application: It provides patient self-services through more than 70 services, such as schedule presentation and creation, review of the results of the laboratory, radiation, prescriptions, notices, insurance approvals, etc.

Q) Revenue from government entities accounted for nearly 13% of the group’s total revenue in 2016. But it continued to decline annually to almost 5% by the end of 2019. What is the reason for those declines?

A) The group focused on raising the number of patients, while reducing or maintaining the average revenue per patient. The strategy had a positive impact on extending the group’s client base, but led revenue from government entities to drop from 13% in 2016 to 5% in 2019 of total revenue. Meanwhile, revenue from insurance firms recorded a compound annual growth rate (CAGR) of 9% in that period.

Insurance revenue accounted for 64% of HMG’s total revenue in 2019, compared to 525 in 2016. The group’s cash collection cycle improved significantly, declining to 72 days in 2019 from 128 days in 2016. Accordingly, the group reported better operating cash flows.

In addition, the number of patients increased at a CAGR of 7% between 2016 and 2019.

Q) What is the role of private healthcare service providers in line with the strategic government transformations under Saudi Vision 2030?

A) The role of the public healthcare sector is integrated with that of the private sector. The Saudi Vision 2030 and the National Transformation Program 2020 aim to increase private sector participation in providing healthcare services to improve efficiency. HMG has provides various services to meet growing demand for healthcare services.

The group manages and operates intensive care units in 6 MOH health facilities in 6 cities in the Kingdom. It also provides home healthcare, and VIDA solutions in 17 public hospitals.

Q) What is the group’s plan to increase its client base from medical insurance companies?

A) The group has established strategic relationships with insurance companies in the Kingdom and the GCC region. These relationships have contributed to the promotion of health insurance services due to the demand on healthcare services provided by the group.

This has increased the number of the group’s customers insured by insurance companies, which has in turn boosted HMG’s market share.

Moreover, the group has provided a professional technical team that centrally executes and manages all medical service contracts with insurance companies, monitors medical approvals and claims, and collects revenues for the medical services provided, thus providing the best experiences and practices to insurance companies, customers and policy holders.

Q) How will the measures of the Council of Cooperative Health Insurance on applying obligatory health insurance contribute to increasing the number of insured clients?

A) Uninsured employees in the private and public sectors have so far reached 6 million. In case those clients receive health insurance coverage, this will reflect positively on private medical groups.

Though the number of insured clients has dropped from 12 million people in 2017 to 10.8 million in 2018, HMG increased the number of insured clients during that period without any major impact on revenue from uninsured patients.

Revenue from insured patients accounted for 64% of total revenue in 2019. Saudis represented 77-80% of HMG’s total clients.

Q) The group is planning to build 3 hospitals. What about the completion ratio of those projects?

A) South West Jeddah Hospital will be the group’s first project with a 330-bed capacity. HMG is currently completing construction works and the new facility is expected to commence operations in 2023.

North Riyadh Hospital will have a 500-bed capacity. The project is still at the engineering design phase. Therefore, the group has not completed the final engineering and operational project studies. It is also expected to commence operations in 2023.

North Jeddah Hospital will have a 350-bed capacity. The project is still at the engineering design phase. Therefore, the group has not completed the final engineering and operational project studies. It is expected to commence operations in 2024.

The new projects will raise HMG’s current capacity by 62% or 1,180 beds.