Company Background

The Company was incorporated in Malaysia under the Act on 22 April 2021 as a private company limited by shares under the name of UMediC Group Sdn Bhd. On 28 September 2021, the company completed the Acquisitions which resulted in Actimed, Evo Medik, U Medihealth, UMediC, UWHC, and UWHM becoming wholly-owned subsidiaries. Subsequently, on 7 October 2021, the Company was converted to a public limited company to facilitate Listing.

The company is an investment holding company. Through the subsidiaries, they are principally involved in the marketing and distribution of various branded medical devices and consumables as well as the provision of after-sales services for all the products. They are also involved in developing, manufacturing, and marketing their medical consumables.

As at the LPD, the Group structure is as follows:

Use of proceeds

1. Capital Expenditure - 33.11%
   1. Construction of new factory buildings - 11.25% (within 30 months)
   2. Setting up new marketing and distribution offices - 21.86% (36 months)
2. Repayment of bank borrowings - 28.93% (within 6 months)
3. Working capital - 27.84% (within 36 months)
4. Estimated listing expenses - 10.12% (within 2 months)

Capital Expenditure - 33.11%

1. Construction of new factory building- 11.25% (within 30 months)

As at the LPD, the Group operates on the Batu Kawan Land with a land area and built-up area of 126,852.68 sq ft and 48,487.40 sq ft respectively. As part of the business strategies to further expand its product range, the company intends to use approximately RM3.50 million for the construction of a new single-story factory building on the Batu Kawan Land. The factory building is estimated to have a built-up area of approximately 35,000 sq ft, which will comprise, amongst others, the following:

1. single story production floor complete with the necessary production machinery for manufacturing of our products. Upon completion, the new factory building will have approximately 30,000 sq ft of production floor space which can house up to two (2) production lines. This is in anticipation of the upcoming commercialization of new products such as sterile water for inhalation, digital oxygen flowmeters, prefilled nebulizers, and humidifier humidity sensors. The company also intends to increase the production capacity of the HydroX series prefilled humidifiers and AirdroX series inhaler spacers. They will manufacture and assemble the said new products above in our new factory building and we may engage third-party contract manufacturers to produce some of the components of our new products; and
2. storage area for distribution products from the marketing and distribution segment as well as raw materials and finished goods from our manufacturing segment in anticipation for an increase in the demand of the products. The storage floor area is estimated to be approximately 5,000 sq ft.

The details of the construction costs for the construction of the new factory building are as follows:

The indicative timeline for the construction of our new factory building is as follows:

In the event the allocated proceeds are insufficient for the construction of the new factory building, any shortfall will be funded out of the portion allocated for working capital, internally generated funds, and/or bank borrowings. Any excess not used for this purpose will be used for working capital purposes.

2. Setting up new marketing and distribution offices

As at the LPD, the Group operates in the head office in Batu Kawan, Penang, and the rented marketing and distribution offices in Bandar Tun Razak, Kuala Lumpur, and Johor Bahru, Johor. The head office in Batu Kawan, Penang includes a showroom that is used to showcase and demonstrate the functionality of the products.

The details of the setup cost for new marketing and distribution offices are as follows: In the event the allocated proceeds are insufficient for setting up new marketing and distribution offices, any shortfall will be funded out of the portion allocated for working capital, internally generated funds, and/or bank borrowings. Any excess not used for this purpose will be used for working capital purposes. Repayment of bank borrowings - 28.93% (within 6 months)
As at the LPD, the total bank borrowings which include lease liabilities owing to financial institutions amounted to approximately RM20.36 million. The company intends to use approximately RM9.00 million to partially repay its bank borrowings as follows:

The repayment of the above-mentioned bank borrowings is expected to result in an annual interest savings of approximately RM0.31 million based on the prevailing interest rate per annum for each of the banking facilities mentioned above. However, the actual interest savings may vary depending on the applicable interest rate at the time of repayment. Further, the repayment of any such outstanding bank borrowings will not result in any penalty or early repayment cost being incurred by the Group. Working capital - 27.84% (within 36 months)

The Group’s working capital requirement is expected to increase in tandem with the plans to expand its business into new markets and expand its product range. Hence, they intend to use approximately RM8.66 million to finance the purchase of additional distribution products. The additional distribution products may include patient monitors, defibrillators, ventilators, maternal and infant care machines, ultrasound machines as well as other products which may be requested by the customers. The price range for the Group’s major products for the Financial Years Under Review and FPE 2022 are as follows:

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The company is principally involved in the marketing and distribution of various branded medical devices and consumables. They are the authorized distributor of multiple established international medical device companies including Philips, Mindray, GE, and Merit. We are also involved in the developing, manufacturing, and marketing of medical consumables, namely HydroX series prefilled humidifiers.

For FYE 2021, they marketed and distributed its products to more than 400 customers comprising public and private hospitals, other healthcare service providers as well as non-medical business entities. Malaysia, being their principal market, contributed approximately RM28.56 million or 83.71% of our revenue for FYE 2021, while the remaining revenue of approximately RM5.56 million or 16.29% was generated from the overseas market. For FPE 2022, Malaysia contributed approximately RM32.54 million or 88.29% of the revenue, while the overseas market contributed approximately RM4.32 million or 11.71% of the revenue. The diagram below summarises our Group’s business model:

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Marketing and distribute segment

The Group markets and distributes various branded medical devices and consumables. They are the authorized distributor of established, international medical device companies including Philips, Mindray, GE, and Merit. We distribute and supply locally to both public and private hospitals, and other healthcare service providers as well as non-medical business entities. To complement the range of product offerings, they also engage third-party contract manufacturers to manufacture and also market various types of medical furniture in accordance with customers’ specifications, including medical beds and carts. In addition, they also provide after-sales services for our medical devices which include maintenance services and technical support, sale of spare parts as well as training on equipment, and for our medical consumables which include clinical training. There is no specific timeframe for the customers to replace or purchase the medical devices. However, the replacement or purchase of the medical devices generally depends on the rate of usage of the medical devices by the respective healthcare institutions where higher utilization rates are expected to lead to more frequent replacement and/or higher capital expenditure budget of the healthcare institutions. The demand for the products is mainly driven by the expansion plans of the customers, the replacement of obsolete or defective medical devices as well as the acquisition of new customers.

Manufacturing Segment

The company develops and manufactures its own medical consumables, namely HydroX series prefilled humidifiers and AirdroX series inhaler spacers.

They also provide after-sales service for its medical consumables which include clinical training. In FYE 2020, due to the COVID-19 pandemic, they saw an opportunity to leverage its existing facilities to manufacture sanitizers and disinfectants. The Group only manufactured sanitizers and disinfectants in FYE 2020 and the Group is currently selling the remaining stocks manufactured in FYE 2020. Moving forward, the Group does not intend to manufacture sanitizers and disinfectants.

Click here to continue on the IPO - UMediC Group Berhad (Part 2)

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