Abraaj exits Thai hospital with 3x return
Of the 19 million tourists who visited Thailand in 2011, an estimated 500,000 traveled specifically for medical care. Although medical tourism only accounts for 0.4% of national GDP, the industry is growing at an annual rate of 16% and is expected to be worth THB100 billion by 2015.
Increased air travel, rising healthcare costs and long waiting lists in developed countries, and an aging global population are the principal reasons for patients opting to receive private treatment in emerging Asia. There is increasing demand from domestic customers as well, as household incomes rise and private health insurance penetration deepens.
The Abraaj Group has ridden this wave and now decided to lock in its gains, securing a 3x return on its investment in Bangkok-based Vejthani Hosptial as regional healthcare chain KPJ Healthcare bought the asset last week. The THB605.6 million deal, which is expected to close in the second quarter of 2013, values Vejthani at 9x forward EBITDA less net debt.
The original investment was made in 2009 by Aureos Southeast Asia Fund, a vehicle run by Aureos Capital until its acquisition by Abraaj earlier this year. The fund injected THB200 million alongside GSB Private Funds, a vehicle set up by Thailand's Government Savings Bank and managed by ING.
"We have made a number of investments in the space both in Southeast Asia and globally," Srisant Chitvaranund, a partner with Abraaj, tells AVCJ. "Vejthani was resilient during the downturn in 2009 and was well positioned to capture an increasing share of the growing medical tourism trade where Thailand has been a large beneficiary."
Vejthani Hospital, which was established in 1994, has a capacity of 500 beds and sees more than 300,000 patients per year. During its holding period, Abraaj supported numerous initiatives to transform Vejthani from a general hospital into a multi-specialty hospital. This allowed Vejthani to increase its market share in medical tourism as well as leverage domestic growth.
KPJ has a network of 12 hospitals in Malaysia and two in Indonesia, with more than 2,600 beds. Prior to the Vejthani acquisition, the company was already boosting its exposure to medical tourism, with the number of international patients increasing 40% in 2011.
KPJ will fund the acquisition through MYR54.5 million ($17.9 million) in debt and MYR6.1 million from its own reserves. According to DBS, Vejthani is expected to deliver an EBITDA of MYR32.1 million for the 2012 fiscal year, which translates to a MYR7.5 million contribution to KPJ's overall EBITDA, or 2.3% of the sum projected for the 2013 fiscal year.
Abraaj is not the only private equity to capitalize on growth in medical tourism. In January, Olympus Capital invested approximately INR5 billion ($100 million) for a minority stake in Indian hospital chain DM Healthcare. The funding will in part be used to develop Kochi, where DM is based, into a medical tourism destination.
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