In the News: 2008

Healthy Outlook: Lombard Investments has invested in a hospital in the Philippines - a country with overlooked strengths as a private equity location.

June 2008

Lombard Investments, a private equity firm with offices in Bangkok, Hong Kong and San Francisco, has acquired an 18 percent stake in healthcare provider Professional Services, which owns and manages The Medical City, a private tertiary care hospital.

In Southeast Asia, investments in the healthcare and medical services sector have traditionally been associated with Singapore and, increasingly, Thailand. The Medical City, however, is based in the Philippines, often overlooked as a potential destination for private equity capital.

Pota Videt, managing director of Lombard Investments, told PEI Asia that The Medical City was an attractive investment as it is a world-class hospital that "has had a consistently high reputation" and is one of the oldest hospitals in the Philippines. It is one of only two hospitals in the country that has been certified with Joint Commission International Accreditation (JCIA), an international healthcare certificate that recognizes and endorses high quality and safety of medical services.

The hospital is run by an experienced team of physicians and moved to a new facility in 2004, he said. The Medical City's facilities comprise a 500-bed hospital complex, which is being expanded to 750 beds, and 280 medical clinics.

"The Medical City is well-positioned to benefit from strong domestic demand for private healthcare as well as a growing international medical tourism industry," said Videt.

He added that the health care sector in the Philippines is attractive since there are a large number of healthcare professionals in the country and the competence level is high. Furthermore, there are around 8-10 million expatriate Filipinos, whose return to the country would likely spark a high demand for health care facilities. Finally, the country's medical sector has the potential, in 5-10 years' time, to attract foreign patients from regions such as North Asia - already a major source of tourist arrivals in the country.

The company paid about 600 million Philippines pesos ($14 million) for its stake. The investment was made from Lombard Asia Ill, a $234 million fund that makes investments in Southeast Asia. Other deals from its third Asia fund include an $18.9 million investment in Krungthep Land, a mid-sized homebuilder in Thailand and an $18.2 million investment in SNC, a Thai manufacturer of air conditioner parts.

Lombard expects to invest further in the Philippines in sectors driven by "fairly robust domestic demand" Videt said. Other, often overlooked, factors in favour of the Philippines are that certain parts of the private sector are very strong, it has a sizable expatriate population contributing to the domestic economy, and a large English-educated workforce. To date, the Philippines has not appeared on the radar of too many private equity fund managers. Don't discount the likelihood of that changing in the near future.