Dubai-based Aster DM Healthcare eyes acquisitions to maintain fast growth

Healthcare provider to invest heavily in the region to repeat spectacular performance.

Aster DM Healthcare plans to maintain revenue growth of up to 30 per cent as the Dubai-based healthcare provider invests about US$250 million in the next two to three years in the Arabian Gulf region and looks for acquisitions.

The company’s current compound annual growth rate (Cagr) between 2013 and this year was 32 per cent.

“Now that the base is getting bigger it is hard to maintain that Cagr, but our intention is to try to keep it between 25 to 30 with a mix of organic and inorganic growth,” said Alisha Moopen, director of corporate strategies at Aster. “Acquisitions will be part of our plan to enable that.”

Aster, which last week opened its first facility in Bahrain, is building five hospitals in the UAE and another one in Qatar. Aster, which owns hospitals, clinics and pharmacies, has six hospitals in the region.

It is also expanding an existing hospital in the Saudi capital of Riyadh after raising its stake in the facility to 97 per cent from 40 per cent in October.

The firm plans to borrow about $125m to finance its expansion plans, and use its own resources to finance the remainder, given that its debt-to-equity ratio is less than 1 per cent.

“We are looking at acquisitions in Saudi,” said Ms Moopen. “We are looking for additional investments and opportunities in Qatar and Bahrain and possibly in Abu Dhabi.”

The company is actively seeking acquisitions in Saudi Arabia because it is a market that suffers from a shortage of beds. Saudi Arabia had the lowest number of beds, nurses and doctors per 1,000 people in the Gulf, according to a 2012 Colliers report.

“There is a lack of medical resources in these countries, so they are open in terms of opening the doors so that the right resources, right expertise and right doctor community comes to these states,” she said.

The Gulf healthcare market is forecast to grow at 12 per cent annually to reach $69.4 billion by 2018 from about $39.4bn in 2013, according to Alpen Capital investment bank. Outpatient and inpatient markets are projected to account for 79 per cent and 21 per cent respectively of the overall market size.

Saudi Arabia is forecast to remain the largest GCC market, while Qatar and the UAE are to be the fastest-growing markets in the future.

Aster is also on the prowl for clinics and pharmacies.

“There is a potential to acquire single doctor clinics or smaller clinics that people are not keen on continuing with,” said Ms Moopen. “We actively scout out options available for pharmacies.”

The company, which also has operations in the Philippines and Jordan, is expanding in India.

In India, where it has eight hospitals, it plans to build seven to 10 more in the next four to five years.

“There is a significant requirement [for hospitals] that is only getting aggravated with the lifestyle [in India],” said Ms Moopen.

In the Philippines, where the company has a medical centre, Aster plans to expand its operations in the next five to 10 years. Building a brand name in the UAE will help the company expand its reach in the Philippines, which has good medical resources.

“We have started with a long-term view to the Philippines,” said Ms Moopen.

“What we like about the Philippines is the availability of manpower that is there. Having the flow of these resources coming to the Gulf also helps us manage our requirements for resources. That’s the biggest challenge we face as a healthcare provider.”