Published April 15, 2009

AGM WATCH
Issues differ for Parkway, RafflesMed shareholders

By CHEN HUIFEN
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PARKWAY Holdings and Raffles Medical Group - two of the biggest private healthcare players here - will hold their annual general meetings (AGMs) today. But the focus of their shareholders is likely to be dramatically different.

Parkway is holding its AGM and an extraordinary general meeting (EGM) straight after at Gleneagles Hospital this morning. Shareholders are expected to raise concerns about the group's debt and its ability to finance future growth - including whether it may be forced to start selling medical suites at its upcoming Novena hospital in a lacklustre market.

At end-December 2008, Parkway had net debt of $681 million and a net debt-to-equity ratio of 0.53. This was after a rights issue in June 2008 that raised over $750 million.

Parkway also cut its 2008 dividend to less than four cents a share, from 24.45 cents a year earlier (which included a special dividend) and 11 cents the year before that. No final 2008 dividend was declared, after a weak fourth quarter performance marked by fewer medical tourists and a $34.4 million provision for unpaid medical bills. Shareholders are likely to ask about the chances of recouping these unpaid bills and what measures have been put in place to prevent a recurrence. After all, the provision is almost the size of Parkway's full-year profit of $34.8 million.

With the building sector easing in recent months, shareholders will also be keen to get an update on the Novena hospital project - especially the cost of construction. Nomura Singapore said in a recent report that the construction contract was yet to be signed as Parkway's management was expecting the cost to fall below $400 million. There could also be questions over growth plans in Malaysia and China - Parkway's two top overseas markets. In particular, Parkway has signalled its intention to penetrate the east coast of Peninsula Malaysia and explore the eastern states of Sabah and Sarawak.

Over at Raffles Medical, the company is seeking shareholders' mandate to renew a share buy-back scheme. It is also recording the retirement of long-time independent director David Lawrence at its AGM at 2.30pm today at Raffles Hospital. Like their Parkway counterparts, shareholders are likely to ask about foreign patient numbers, after tourist arrivals continued to drop in the first two months of this year.

Raffles Medical has previously said its foreign patient load was not adversely affected in 2008. But without a substantial overseas wing, it is much more dependent on the performance of its domestic operations and its ability to draw foreign patients to its infrastructure in Singapore.

Shareholders will be interested in expansion plans, seeing that Raffles has been relatively conservative in this area. They may also want to hear about the progress and outlook for the group's healthcare insurance unit which, according to the latest annual report, has posted its maiden profit.