Radium for cheaper healthcare

THEY have long been building affordable high-rise apartments.

Now, Radium Development Bhd are planning to build an affordable private hospital.

In a rare move, the property developer announced this week that it will build and operate the private hospital.

This initiative will see the company opening a 140-bed private hospital in Ayer Keroh, Melaka in 2028.

It will be a tertiary-level medical facility and will be named Radium Hospital @ Ayer Keroh.

There are other property development companies that have embarked on private healthcare but these are usually conglomerates with huge balance sheets.

These include Sunway Bhd, which now owns and operates several Sunway Medical Centre hospitals around the country.

Then, there is the government-linked conglomerate Sime Darby Bhd which had owned Ramsay Sime Darby Healthcare which houses Subang Jaya Medical Centre in a joint venture before it was sold in its entirety to Columbia Asia Healthcare Sdn Bhd in November 2023.

The barriers to entry into healthcare are high.

It requires specialised skillsets and is capital-intensive.

Radium’s decision to diversify away from the property scene also appears to come when its net profit margins have declined since its financial year 2021.

In its latest first quarter ended March 31, the company, which was listed in May 2023 reported net profit margins of 4.6%, less than the 7.1% that was registered in the same quarter a year ago.

Radium’s core business is in building affordable high-rise apartments but it has a healthcare division called Radium Healthcare Sdn Bhd.

The division’s chief executive officer Dr Arun Kumar says he is confident of ensuring the success of this venture.

He believes he has the necessary experience to execute this.

Dr Arun was part of the then Manipal Hospital Klang before it was acquired and now renamed the Bukit Tinggi Medical Centre.

“I have about five years of experience in running Manipal Hospital Klang.

“The hospital was started in 2016 and because Manipal wanted to exit, the hospital was sold to Ramsay Sime Darby Healthcare in 2021.

“Before that I was a clinical directorate in Sunway Medical Centre for some time,” Arun says.

“I had built the hospital for Manipal and then sold it for quite a decent profit for them.

I feel it is time to come out on my own to do this with Radium.

“I think there are still ample opportunities for new private hospitals around the country.

“We don’t really have failures of hospital groups per se in the local system,” he adds.

According to Radium Development’s group managing director Datuk Gary Gan, the hospital will be parked under Radium Healthcare Sdn Bhd which will start as a 90:10 joint venture with Arun through his vehicle M Life Healthcare Sdn Bhd.

“We found out that there is still a lack of private hospital beds in Tier 2 cities. So this is a blue ocean strategy.

“Our paths crossed with Radium and Gan – we found out that his vision included being in healthcare, which is very much aligned with ours. We want to build hospitals but the key thing is want to execute affordable healthcare here,” says Arun.

“We can capitalise on lower infrastructure costs in this partnership with Radium.

“Based on the aim to make healthcare affordable, one doesn’t have to make an obscene amount of money from private healthcare.

“I think I have the experience to know where I can keep costs down,” he adds.

As for Radium’s rationale to diversify its businesses now, Gan says he has been planning for this since the Covid-19 pandemic.

“If you are only having one type of business in the company, it is quite dangerous. The diversification should not deviate too far from our core business of property development.

“For this hospital business, if we do it right in the future we can incorporate this into our property masterplan to complement our development projects,” Gan says.

The initial capital expenditure costs it will incur is some RM200mil which also includes land costs, and these will be funded via borrowings and internally generated funds.

“We are starting at 140 beds but we will scale it up to 200 beds eventually.

“The building is built for a capacity of 200 beds and we’re leaving one floor empty.

“When it is near full capacity, we can scale it up when necessary,” Arun says.

The hospital is expected to break-even with a return on investment by year seven - after three years of construction and four years of operations, Arun adds.

“Earnings before interest, taxes, depreciation and amortisation break-even will be earlier, in year two or year three of operations,” he notes.