Clear skies for UMediC

ALTHOUGH UMediC Group Bhd was listed in 2022, it is still in the early stages of its growth. In the last five quarters, both the top line and bottom line of the medical device distributor and manufacturer declined year-over-year.

Lower demand for its products coupled with a spike in staff costs following an expansion of facilities are to blame.UMedic’s share price, which hit 86 sen about a year after it listed, has dipped to a low of 57 sen. But the stock still trades at a relatively high price earnings multiple of 24 times historical earnings, with a market capitalisation of RM211mil.Nonetheless, the company remains confident of a stronger performance for its financial year ending July 31, 2026 (FY26), when the cost of the new plant start-up (Plant 2) normalises.“The expansion raised administrative costs as more employees were required to support new products and production growth. However, we expect cost stabilisation within the next six to 12 months.“We are also expanding Plant 1’s cleanroom facilities (expected to be completed in April) to scale up medical device manufacturing and boost production,” UMediC executive director and chief executive officer Eric Lim Taw Seong tells StarBiz 7.Plant 2 began operating last December. It is part of the IPO expansion plan and is next to Plant 1 in Batu Kawan, Penang.With Plant 2, the group had intended to scale up production of its HydroX prefilled humidifier from 300,000 to 420,000 (450ml) bottles per month, with further increases to 600,000 and eventually 1.1 million bottles per month by the first quarter of 2025 (1Q25).At present, the group is producing only 450,000 to 600,000 bottles per month.Ng Sze Hui, the alternate director to Datuk Ng Chai Eng, says the arrival of a new blow-fill-seal (BFS) machine will drive production towards the 1.1 million target in a staggered manner."We have invested more than RM10mil in the BFS machine. It will help reduce staffing needs and shorten lead times, increasing manufacturing capacity by three to four times,” she says.UMediC’s in-house manufactured medical consumables include the HYDROX series prefilled humidifiers, the HYDROX prefilled nebulizers, the AIRDROX series inhaler spacers and the FLEXIDROX water for inhalation bag. The group holds three registered product-related intellectual properties (IPs).UWC Bhd co-founders Datuk Ng Chai Eng and Datuk Lau Chee Kheong along with Lim, control 51.16% of UMediC via UMediC Capital Sdn Bhd. They also each hold a 5% direct stake in UMediC.Lim is the nephew of Datuk Ng Chai Eng while Sze Hui, who is also UMediC’s legal and product development manager, is Ng’s daughter.UMediC has a manufacturing presence in 40 countries, though its market share in each is small. The group is now focused on expanding the sales of its latest prefilled nebulizers and water for inhalation bags across its markets."With medical devices, the barrier to entry is higher due to the time and cost involved in registering a product in a country.“However, once we penetrate a market, it is just a matter of scaling up because the stickiness is there, as distributors or authorised representatives are unlikely to switch manufacturers because it would take up a lot of time,” Sze Hui says.UMediC is the authorised distributor for renowned international medical device companies such as Philips Healthcare, Mindray and GE Healthcare, supplying among others, ICU beds, hydraulic stretchers and emergency medical carts.This segment has been impacted by lower demand for medical devices and consumables from both public and private hospitals as well as healthcare service providers, declining by 16.5% y-o-y in 1Q25.However, as Lim points out, the demand for medical equipment and devices is ever present underpinned by the replacement of aging equipment and the establishment or expansion of hospitals.The lower demand cited is actually a timing issue caused by procurement delays which can be up to six months due to extended budget approval and supplier selection processes.“So it is not to say there is no demand—hospitals will eventually purchase the equipment,” Lim adds.To counter fluctuations, UMediC maintains a wide range of equipment with different prices and margins, allowing it to sustain higher profits despite revenue declines.Between its manufacturing and distribution businesses, the latter logs a higher margin for UMediC.Moreover, the government’s shift from an asset ownership model to a leasing model for medical equipment bodes well for the group. The group expects to see the same, if not slightly better margins, with the new model.“There will be lower revenue per equipment delivered as it is spread over multiple years, but this allows hospitals to procure more equipment within the same budget, which is good. Under the new model, costs are likely to be recovered within the first few years,” Lim says.Currently, there is a delay in shortlisting winners by the government under the new model.Meanwhile, UMediC’s venture into the laboratory segment through Patho Solutions (M) Sdn Bhd in 2023 is showing positive results, contributing 5% to 10% of its revenue.The group has also diversified into healthcare services with the establishment of UMC Care Centre, which offers services including aged care, short-term care for post surgery patients, and long-term care for individuals with illnesses.UMediC had previously said it will be accepting patients by the end of 2024. However, Lim says the group has received enquiries but there are no patients yet.“We are exploring home care services as there have been some requests,” he says.