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What I Learnt About HC Surgical Specialists Ltd (Catalist:1B1)

I’ve had the opportunity to meet up with the IR team of HC Surgical Specialist (HCSS) awhile back and thought it was an interesting company that could be worth looking into deeper given the recent Singapore budget with heightened emphasis on the elderly population and increased healthcare awareness.


HC Surgical Specialists Limited (Catalist:1B1) is an investment holding company which provides medical services primarily in Singapore. The company was incorporated in 2015, operates 16 Clinics, and is based in Singapore. HCSS was founded by Dr Heah Sieu Min and Dr Chia Kok Hoong, who both have over 20 years of experience each. Today, HCSS has 6 specialists (See: Specialist Team) and 5 GPs (See: GPs) and continues to grow the team.

HCSS’ vision is to build an organization dedicated to making private healthcare accessible to the broadest consumer base possible. This is made possible by through Medisave and by expanding into the heartlands.

Services Provided

It offers endoscopic procedures, including gastroscopies and colonoscopies; and general surgery services with a focus on colorectal procedures in a network of clinics.

The company also offers treatment services for other conditions, such as haemorrhoids, anal abscesses, anal fissures, anal fistula, gallstones and inflammation of the gallbladder, hernias, colorectal cancer, stomach cancer, colonic diverticular disease, and cysts and lipomas; and vein laser vascular, laparoscopy, and other general and specialized medical services.

In addition, it provides home care, such as nursing, physiotherapy, speech therapy, occupational therapy, and ambulance services; and general consultation and diagnostic services, including blood tests, X-Rays, ultrasound, CT Scans, and MRIs.

Investment Merits

  1. Medisave Accreditation
  2. Location
  3. Young “Superstar Doctors”
  4. Medinex

1. Medisave Accreditation

With Medisave Accreditation, HCSS is able to encourage patients to visit private clinics instead of public hospitals as a portion of the cost is deducted from medisave account. Apart from that, private clinics typically have shorter waiting times than public hospitals. For reference, hospital waiting time can go up to 7h when a hospital faces an influx of patients.

Median Hospital Waiting Time (~2h)

2. Location

Clinics are located across Singapore, in both central and residential areas, including the heartland neighbourhoods that are close to public transportation. This allows HCSS to shorten the waiting period for appointments relative to hospitals or public medical institutions, enhancing its ability to provide timely quality healthcare and treatment to patients. They’ve grown from 7 clinics in 2016 to 16 clinics today, expanding outwards from the central areas (marked by orange pins).

Growth strategy has been clearly outlined – Growth through acquisition

3. Young “Superstar Doctors”

HCSS differs largely in its approach towards the acquisition of specialists onboard its team. HCSS aims to identify undervalued “superstar” doctors who are young at an early stage by supporting their growth through the setting up of their clinic to patient referrals. Rather than wait for these doctors to really have established themselves before acquiring them, HCSS brings these doctors into its eco-system early in the specialists’ journey and at a relatively lower acquisition cost for controlling stake. Considerations range from S$0.4m-2.2m for a 51%-100% stake in the young specialists.

Incentivising the young specialists, HCSS offers these specialists exit opportunities at 10x P/E in the 4th-5th year for the remaining 49% stake. This motivates the young specialists to work harder to achieve a higher EPS by Year 5 to exit the business, while HCSS benefits from the heightened profits.

4. Medinex

HCSS acquired 49% of Medinex (SGX: OTX) in 2017. Medinex is a B2B service provider supporting private specialist clinics in overseeing the setting up of clinics, facilitating applications for relevant clinic licences, providing business support services and helping in the procurement of medical and pharmaceutical products. Outside of the healthcare industry, Medinex also offers business support services such as accounting and tax agent services.

HCSS as a medical support platform providing backend operational support and patient referrals takes the burden off the doctors in HCSS’ eco-system as they are able to focus on performing surgeries without the hassle of handling administrative matters.


HCSS’ strategy of growth through acquisition, for now, appears successful as revenue continues to grow rapidly. Margins still look healthy for now despite having come down significantly. The growth in revenue supports the margin compression as net income remains relatively stable while they expand.

With a net cash position, suggests there’s still runway for further acquisitions in the near future, fueling the growth of the business.

Company Name LTM Gross Margin % LTM EBITDA Margin % LTM EBIT Margin % LTM Net Income Margin %
Raffles Medical Group Ltd (SGX:BSL)  29.3%  20.3%  16.6%  14.53%
HC Surgical Specialists Limited (Catalist:1B1)  52.5%  37.6%  35.3%  24.85%

Looking into Healthcare, RMG comes in mind. Comparing against RMG, HCSS has better margins primarily due to staff cost. RMG’s staff cost as a % of revenue stands at 50% while HCSS is at 35%. Played around with the numbers a little, if RMG was able to operate at HCSS’ efficiency, that translates to ~60m [(35%*Revenue)*(1-17%)] after tax in savings or 3.4 cents EPS (FY2018 EPS was 3.98c), almost doubling.

However, RMG is a much larger company owning hospitals which require much more staff performing other functions as well as higher depreciation expenses, unlike HCSS which doesn’t own an entire building like RMG. It would be interesting to see if HCSS can scale up without too much margin compression to compete effectively in the future to trade at similar valuations as RMG.


Expansion beyond Endoscopic Services

With the establishment as a successful medical support platform, HCSS can begin to scale across specialities, opening doors to increased streams of income once the growth in endoscopic services slows down. A diversified speciality works in the favour of HCSS as it can look out for more “superstar doctors” in other fields.


  1. Inability to add new Specialists

HCSS is in the business of investing in young “Superstar Doctors”. Think of it as like a VC firm, where many of them can go nowhere and one unicorn is all it takes to reverse all the bad investments. The good thing is that risk is mitigated through low acquisition price of the specialists and there isn’t cash burn like a start-up. Understanding that there’s a potential to look beyond endoscopic services, this risk doesn’t appear to be significant.

2. Key man risk

Key man risk was a major concern when HCSS first listed as revenue was largely contributed by Dr Heah, Dr Chia only. Three years down the road, key man risk has decreased significantly since IPO in 2016 as Dr Charles Tan, Dr Lai and Dr Ong join the team along with the contributions from Medinex. Going forward, key man risk is a diminishing concern as more acquisitions takes place to diversify the contributions from the various specialists.


Overall, I think the eco-system HCSS is building up is interesting and is worth watching out for more developments in the business in the near future. The key things to watch out for are HCSS’ acquisition activities, margin compressions and branching out beyond endoscopic services.

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