Waiting game

 

PRINCE Court Medical Centre (PCMC) is a top hospital with a hotel-like feel that was set up by Petronas.

 

Operating costs were naturally high and over the years losses mounted. With accumulated losses reportedly past RM1bil, the hospital was put up for sale and on Thursday, Khazanah Nasional Bhd paid an undisclosed amount to take over the hospital.

 

Concurrently, Khazanah inked a collaboration agreement with IHH Healthcare Bhd for shared services support and operational improvement initiatives at PCMC. IHH is 41% owned by Khazanah and will be given the right of first offer to acquire PCMC during a pre-agreed period.

 

The deal is multiple in some ways. For Khazanah, buying PCMC allows it to rehabilitate the asset towards profitability and do so without the piercing eyes of the investment community. PCMC is a 270-bed hospital in a business and industry that has a growth trajectory a lot of businesses will envy. The hospital with its specialists and reputation is one that will add to the portfolio of hospitals under IHH should it decide to go ahead and buy the hospital.

 

Keeping it under Khazanah also helps with IHH’s financials. The loss-making operations of PCMC would be a drag on IHH and for a stock that is on the global radar of investors, that decision would have been detrimental to the share price performance of IHH.

 

The simple fact is that the healthcare business in Malaysia is growing. Columbia Asia Group has just received additional equity investment of US$210mil (RM820mil) to build new hospitals and deepen the level of specialty care in existing facilities.

 

That is apart from the expansion plans that other hospital groups in the country are undertaking.

 

IHH by entering into a collaboration agreement with Khazanah is still expected to make money from the hospital. It is expected to gain from management fees given to PCMC and that will allow itself to see that contribution be accretive to earnings until a time it decides to buy the hospital outright.

 

 

 

Global turmoil

 

THE tariffs imposed by the United States and China on goods being traded between both countries is something most people have been expecting but dreading.

 

The US decided to impose tariff duties on US$60bil worth of imports from China and China retaliated by slapping extra tariffs on US$3bil worth of goods brought into the country.

 

The action by both countries slammed stock markets yesterday. History has shown that a trade war is a lose-lose situation for countries engaged in such destructive activities and by estimates, it will shave global growth into the foreseeable future.

 

That amount is, however, small. Just a minuscule percentage will be lost by both the US and China but the worry is reciprocative action that follows. Should the US and China deepen the tariff and duties impose on goods shipped between both countries, then that will have a lingering and possibly longer-lasting impact on global trade.

 

Corporations that facilitate global trade no longer operate in isolation. Supply chains are deep and throughout the world and punitive action by either and both countries will have a ripple effect in many other countries.

 

Malaysia can just be a spectator to all of this. Given the openness of the economy, action by both sides will eventually effect business in Malaysia. As it stands, Malaysia will be hit by the higher tariffs on solar panels as Malaysia is among the largest exporters of such goods in the world.

 

The other worry is the knock-on effect that will happen if the list of goods is expanded into other areas. The US has already voiced its dissatisfaction over the trade imbalance between both countries.

 

But any trade wars also does not serve the US. Growth will be affected and with jobs the priority for every single government, lasting trade wars will not only chip away at domestic growth and also jobs, and that will be to the detriment of any country and government.

 

 

StarBiz