Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Bottom-Up

We had been bearish on the stock for several years because of 1) deceleration in growth, 2) planned significant capacity increases in Singapore, and 3) the launches of two hospitals in China. Now that the market has baked in slower growth in the core business and start-up losses in China should stabilize this year and decline in future years, we think the shares are worth a second look. Further, the lack of a clear succession plan for the Founder/Executive Chairman suggests that we have a path to an exit.

We had been bearish on the stock for several years because of 1) deceleration in growth, 2) planned significant capacity increases in Singapore, and 3) the launches of two hospitals in China. Now that the market has baked in slower growth in the core business and start-up losses in China should stabilize this year and decline in future years, we think the shares are worth a second look. Further, the lack of a clear succession plan for the Founder/Executive Chairman suggests that we have a path to an exit.

Raffles Medical Group: A Path to the Exit

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ)</a> CEO John Riady hosted a call to update investors and analysts on the company's business and prospects, revealing some key milestones and an exciting outlook. 
The company has delivered on all fronts despite COVID-19, with strong execution and increasing traction for its core business, and will scale up in 2021 to continue this momentum. 
<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ</a>) has now completed its refinancing and now has a stronger governance framework and senior management team. 
It just completed the long-awaited divestment of Lippo Mall Puri to <a href="https://www.smartkarma.com/entities/lippo-malls-indonesia-retail-trust" target="_blank" data-smartkarma-citation="entities:10946:1" rel="noopener">Lippo Malls Indonesia Retail Trust (LMRT SP)</a> for IDR3.5tn, which is significantly cash and value-accretive for <a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ).</a>
<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ)</a> recently announced its FY2020 Marketing Sales with an increase of +45% YoY to Rp2.67tn, which was +8% above its FY20 target. The company targets  FY2021 marketing Sales of IDR3.5tn to be supported by multiple affordable landed housing launches.

Lippo Karawaci (LPKR IJ) CEO John Riady hosted a call to update investors and analysts on the company's business and prospects, revealing some key milestones and an exciting outlook. 
The company has delivered on all fronts despite COVID-19, with strong execution and increasing traction for its core business, and will scale up in 2021 to continue this momentum. 
Lippo Karawaci (LPKR IJ) has now completed its refinancing and now has a stronger governance framework and senior management team. 
It just completed the long-awaited divestment of Lippo Mall Puri to Lippo Malls Indonesia Retail Trust (LMRT SP) for IDR3.5tn, which is significantly cash and value-accretive for Lippo Karawaci (LPKR IJ).
Lippo Karawaci (LPKR IJ) recently announced its FY2020 Marketing Sales with an increase of +45% YoY to Rp2.67tn, which was +8% above its FY20 target. The company targets  FY2021 marketing Sales of IDR3.5tn to be supported by multiple affordable landed housing launches.

Lippo Karawaci (LPKR IJ) - An Audience with the Future

Siloam International Hospitals / Equity Bottom-Up

A recent conversation with <a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> revealed that it continues to see positive momentum behind its COVID-19 testing for both PCR and rapid &amp; serology testing, which continue to offset the slower inpatient and outpatient numbers. COVID-19 testing and treatment is filling the revenue gap of lower patient numbers but patient numbers are improving slowly at the same time. 
The company can test and analyze results at 13 different sites currently but can provide the tests at all its 39 hospitals. 
Four Siloam hospitals are set up specifically for COVID-19 patient treatment and the company has now treated just over 8,000 patients so far with average stays of over two weeks per patient. These patients are paid for by the government and at quite a decent commercial rate.
Monthly revenues are now back on a par with last year, with the trough in April and May, with MoM improvements from June onwards but obviously still less people visiting hospitals and even more so for inpatients.
Doctors are also back to working full hours again having cut back due to the pandemic, with COVID-19 treatment and testing helping to plug the gap of lower patient numbers.
The coming months should start to see some of the pent-up demand for elective procedures start to come through in 1H2021, which along with continued testing and the start of vaccinations will start to drive a recovery in earnings. 
<a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> looks interesting from a valuation perspective trading on 6.3x FY21E EV/EBITDA and 5.7x FY22E EV/EBITDA versus its 3-year average of 9.7x forward EV/EBITDA and it's going into a recovery, as well as rising profitability.

A recent conversation with Siloam International Hospital (SILO IJ) revealed that it continues to see positive momentum behind its COVID-19 testing for both PCR and rapid &amp; serology testing, which continue to offset the slower inpatient and outpatient numbers. COVID-19 testing and treatment is filling the revenue gap of lower patient numbers but patient numbers are improving slowly at the same time. 
The company can test and analyze results at 13 different sites currently but can provide the tests at all its 39 hospitals. 
Four Siloam hospitals are set up specifically for COVID-19 patient treatment and the company has now treated just over 8,000 patients so far with average stays of over two weeks per patient. These patients are paid for by the government and at quite a decent commercial rate.
Monthly revenues are now back on a par with last year, with the trough in April and May, with MoM improvements from June onwards but obviously still less people visiting hospitals and even more so for inpatients.
Doctors are also back to working full hours again having cut back due to the pandemic, with COVID-19 treatment and testing helping to plug the gap of lower patient numbers.
The coming months should start to see some of the pent-up demand for elective procedures start to come through in 1H2021, which along with continued testing and the start of vaccinations will start to drive a recovery in earnings. 
Siloam International Hospital (SILO IJ) looks interesting from a valuation perspective trading on 6.3x FY21E EV/EBITDA and 5.7x FY22E EV/EBITDA versus its 3-year average of 9.7x forward EV/EBITDA and it's going into a recovery, as well as rising profitability.

Siloam International Hospital (SILO IJ) - The Saving Grace

<a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)</a> is Indonesia's leading diagnostics player and has proved its worth in dealing with COVID-19  with a mix of digital strategies, cost savings, and increasing testing capacity for COVID-19. 
The company recently released its 3Q2020 numbers, which saw a sharp increase in revenues to a level significantly above 1Q2020. 
<a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)</a> managed to achieve an increase in the number of visits for 9M2020 although the number of tests was lower and hence revenue per visit, given the rise in single COVID-19 tests and the decline in regular medicals due to the pandemic. 
The ramp-up in COVID-19 testing capacity should help to support growth in 4Q2020 and into FY21E, and we would also expect some recovery in regular testing at the same time. 
The move to providing more digital and home services for patients through the company's App has reduced costs and will allow the company to provide a more efficient service. 
<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)</a> is expected to see a sharp rebound in EPS of +28% in 2020 and trades on a reasonable 15.9x FY21E PER and 6.8x FY21E EV/EBITDA, which is at a discount to its 3-year average forward EV/EBITDA of 7.8x. The increasing health consciousness in Indonesia is already reflected in more esoteric testing and preventative treatments, which plays into <a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)'</a>s strengths. 
</div>

Prodia Widyahusada (PRDA IJ) is Indonesia's leading diagnostics player and has proved its worth in dealing with COVID-19  with a mix of digital strategies, cost savings, and increasing testing capacity for COVID-19. 
The company recently released its 3Q2020 numbers, which saw a sharp increase in revenues to a level significantly above 1Q2020. 
Prodia Widyahusada (PRDA IJ) managed to achieve an increase in the number of visits for 9M2020 although the number of tests was lower and hence revenue per visit, given the rise in single COVID-19 tests and the decline in regular medicals due to the pandemic. 
The ramp-up in COVID-19 testing capacity should help to support growth in 4Q2020 and into FY21E, and we would also expect some recovery in regular testing at the same time. 
The move to providing more digital and home services for patients through the company's App has reduced costs and will allow the company to provide a more efficient service. 

Prodia Widyahusada (PRDA IJ) is expected to see a sharp rebound in EPS of +28% in 2020 and trades on a reasonable 15.9x FY21E PER and 6.8x FY21E EV/EBITDA, which is at a discount to its 3-year average forward EV/EBITDA of 7.8x. The increasing health consciousness in Indonesia is already reflected in more esoteric testing and preventative treatments, which plays into Prodia Widyahusada (PRDA IJ)'s strengths. 


Prodia Widyahusada (PRDA IJ) - Testing Times a Positive

<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ)</a> has not had an easy time of it over the past two years, with a complicated financial restructuring and rights issue but that is now behind the company, with a new high caliber management team driving its core property, and other businesses forward. 
The company is now focused on three core pillars, which include its property development, investment property and hospitals business under <a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ),</a> and its fund management business, which covers its Singapore listed REITS in including <a href="https://www.smartkarma.com/entities/first-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:15848:1" rel="noopener">First REIT (FIRT SP)</a> and <a href="https://www.smartkarma.com/entities/lippo-malls-indonesia-retail-trust" target="_blank" data-smartkarma-citation="entities:10946:1" rel="noopener">Lippo Malls Indonesia Retail Trust (LMRT SP).</a>
The core property business is back in business, with the company already surpassing its FY20E marketing sales target of IDR2.5tn by October versus IDR1.9bn last year, and with a more aggressive target of IDR3.5tn for FY2021E, with quality of the earnings improving, with less raw land sales. 
<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ)</a> is also working on developing and selling its legacy high rise project. These have experienced some COVID-19 related delays but will start in 2021, with a finite cost to complete those projects.
The company's real estate management and hospital business has seen more COVID-19 impact with obvious pressure on rentals and revenues at <a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> down by -4%, only supported by increased exposure to COVID-19 testing, with patient volumes down -25%. for 9M2020.
The sale of the Puri Mall to <a href="https://www.smartkarma.com/entities/lippo-malls-indonesia-retail-trust" target="_blank" data-smartkarma-citation="entities:10946:1" rel="noopener">Lippo Malls Indonesia Retail Trust (LMRT SP)</a> will likely complete in January/February 2021 but activity with its REITs is likely to be limited, especially with <a href="https://www.smartkarma.com/entities/first-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:15848:1" rel="noopener">First REIT (FIRT SP)</a> as <a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> has slowed expansion and is focused on sweating its assets and bringing them to maturity. 
<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" data-smartkarma-citation="entities:3121:1" rel="noopener">Lippo Karawaci (LPKR IJ)</a> will likely book a loss in 2020 but should turn a profit in 2021. It is currently trading on 0.6x FY2020PBV and at an 83% discount to the company's NAV.  This is by no means challenging for a company going through a meaningful turnaround, with an improving and more visible earnings outlook, as well as a relatively healthy balance sheet.

Lippo Karawaci (LPKR IJ) has not had an easy time of it over the past two years, with a complicated financial restructuring and rights issue but that is now behind the company, with a new high caliber management team driving its core property, and other businesses forward. 
The company is now focused on three core pillars, which include its property development, investment property and hospitals business under Siloam International Hospital (SILO IJ), and its fund management business, which covers its Singapore listed REITS in including First REIT (FIRT SP) and Lippo Malls Indonesia Retail Trust (LMRT SP).
The core property business is back in business, with the company already surpassing its FY20E marketing sales target of IDR2.5tn by October versus IDR1.9bn last year, and with a more aggressive target of IDR3.5tn for FY2021E, with quality of the earnings improving, with less raw land sales. 
Lippo Karawaci (LPKR IJ) is also working on developing and selling its legacy high rise project. These have experienced some COVID-19 related delays but will start in 2021, with a finite cost to complete those projects.
The company's real estate management and hospital business has seen more COVID-19 impact with obvious pressure on rentals and revenues at Siloam International Hospital (SILO IJ) down by -4%, only supported by increased exposure to COVID-19 testing, with patient volumes down -25%. for 9M2020.
The sale of the Puri Mall to Lippo Malls Indonesia Retail Trust (LMRT SP) will likely complete in January/February 2021 but activity with its REITs is likely to be limited, especially with First REIT (FIRT SP) as Siloam International Hospital (SILO IJ) has slowed expansion and is focused on sweating its assets and bringing them to maturity. 
Lippo Karawaci (LPKR IJ) will likely book a loss in 2020 but should turn a profit in 2021. It is currently trading on 0.6x FY2020PBV and at an 83% discount to the company's NAV.  This is by no means challenging for a company going through a meaningful turnaround, with an improving and more visible earnings outlook, as well as a relatively healthy balance sheet.

Lippo Karawaci (LPKR IJ) - Reasons to Be Cheerful

Indonesia

Siloam International Hospitals is Indonesia's largest private hospital network, operating over 41 hospitals and numerous clinics across various provinces. The company offers an integrated healthcare ecosystem, providing comprehensive medical services including general and specialized treatments, emergency care, and health education, with centers of excellence in areas like oncology and neurosurgery. Headquartered in Tangerang, Indonesia, the company was founded on August 3, 1996.

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Siloam International Hospitals (SILO IJ)

Raffles Medical Group: A Path to the Exit

We were bearish for several years because of slowing growth and expected drags from new facilities. We are turning bullish now that the market...

Kemp Dolliver, CFA

Lippo Karawaci (LPKR IJ) - An Audience with the Future

Lippo Karawaci is a restructuring story, now past a significant financial restructuring, a crucial asset sale, and important rental revision, which...

Angus Mackintosh

Siloam International Hospital (SILO IJ) - The Saving Grace

Siloam is Indonesia's youngest and largest hospital players which is on the cusp of a higher profitability with COVID testing and treatment filling...

Angus Mackintosh

Prodia Widyahusada (PRDA IJ) - Testing Times a Positive

Prodia has rapidly adjusted in the face of COVID-19 and is now benefiting from increased COVID testing capacity and increasing health consciousness...

Angus Mackintosh

Lippo Karawaci (LPKR IJ) - Reasons to Be Cheerful

Lippo Karawaci (LPKR IJ) has been through a financial restructuring and rights issue that is now behind it, with a new high-caliber management team...

Angus Mackintosh

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