Sources say that three parties - Faber Group Bhd's wholly-owned subsidiary Faber Mediserve Sdn Bhd, Pantai Medivest Sdn Bhd and Radicare (M) Sdn Bhd which are vying for the hospital support services (HSS) concessions by the Government are likely to get their contracts renewed within the next month (Jan 2012 & Beyond).
According to sources, the Government had renewed the contract for a period of six months initially and had called for a tendering process by these three companies about a month before their contracts ended in October 2011.
It is learnt that Faber, Pantai Medivest and Radicare were the only companies which were called to submit their tenders for renewal because of their experience and expertise in providing HSS for hospitals in Malaysia .
The three companies are presently providing HSS for all government hospitals and clinics in Malaysia and a selected number of private healthcare companies.
The contract value is not fixed when the concession is granted but it is estimated that these three companies had raked in a total of RM1.1bil in revenue from these government concessions alone in 2010.
It is learnt that the revenues raked in per annum by these three companies were not fixed per se as this very much depended on how much actual volume was handled by each respective company. Should the volume increase due to the increased number beds per hospital or any extension by the hospitals that required their services, revenues to these companies would rise accordingly.
Industry sources said that of the three, the only listed entity was Faber, which has a 50% market share in terms of revenues, while Radicare was the second largest with a 30% market share, and Pantai Medivest with a 20% share.
Faber's concession covers 81 government hospitals in the Perak, Kedah, Penang, Perlis, Sabah and Sarawak; while Pantai Medivest's concession covers about 25 government hospitals in the southern region of Peninsular Malaysia; and Radicare's portion includes government hospitals in the Federal Territory of Kuala Lumpur, Selangor, Kelantan, Terengganu and Pahang.
HSS' activities cover the upkeep and cleansing of linen and laundry, biomedical engineering management services, facilities engineering maintenance services, clinical waste management services, hospital planning development services and cleaning and upkeep of the hospital building infrastructure.
These comprise a crucial link to the government healthcare system which provides maintenance of government hospital and healthcare infrastructure.
Faber is 34.3% owned by the Government's investment arm, Khazanah Nasional Bhd, 12.5% owned by unit trust company Universal Trustee Malaysia Bhd, and about 10% by Lembaga Tabung Haji.
Other than being a HSS provider for Malaysian government hospitals and those in India and the United Arab Emirates , Faber also derives a portion of its revenues from property development projects. This figure fluctuates from quarter to quarter depending on the progress of its property projects.
In the third quarter of its financial year ending Dec 31, 2011 (FY11), Faber derived 16% of its revenue from the property industry while the rest came from the integrated facilities management (IFM) services portion of which the HSS segment is also parked under.
Government HSS contracts contributed to 45% of its third-quarter revenue in FY11 compared with a 74% contribution in the second quarter due to additional incoming revenue stream from overseas IFM services in the third quarter. Faber recorded profit before tax margins from government HSS concessions of an average of about 15% in both the third and second quarters.
Meanwhile Faber is the latest to join a handful of Malaysian companies such as Ranhill, Muhibbah, LCL, WCT and Sime Darby to face troubles in Middle East .
The group is facing difficulties getting paid for the jobs in the UAE and has to set aside rm44.5 million costs for the works completed.
The problem sent faber into the red when it reported a net loss of rm26.87 million in 3QFy2011 ended Sept.
In mid Dec 2011, it was slapped with a summons and statement of claim of rm13.1 million from a sub contractor for its project there.
Faber has yet to recognize any revenue for the rm44.5 million costs from work done as it is still finalizing the invoice to be issued to its clients.
In addition, Faber said there was rm12.9 million impartment losses at the expenses level due to the group’s expectation of the delay in collection of trade receivables from its principal, WRM in the UAE.
Faber said in 3QFy2011, it was in active talks with WRM to recover the revenue, costs and receivables from the UAE project, and include the option to be extended annually for the next four years.
Faber had already received notices of non renewal of contracts early 2011 and the works had ceased. Given the uncertainty of Faber getting its local concecssion contracts renewed, the problems in the UAE do not help Faber’s earnings.
In late Oct 2011, Faber received an interium extension of its long running 15 year concession on the day before expiration. However, the short term of only six months or until a new deal is signed whichever is the first, suggests, undercuts in the industry and lends credence to long running rumors that some parties are eyeing parts of Faber’s lucrative concession, particularly in Sabah and Sarawak.
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