HC Surgical Specialists Reveals Strategic Growth Plans, Dividend Policy Updates, and Post-Suspension Recovery at AGM: What Investors Must Know

Key Takeaways from HC Surgical Specialists’ 2025 Annual General Meeting

HC Surgical Specialists Limited (SGX: 1B1), a leading provider of endoscopic and surgical services in Singapore, addressed several pressing shareholder questions at its Annual General Meeting (AGM) on 25 September 2025. The session, led by the CEO, offered valuable insights into the company’s near- and long-term prospects, financial policies, and strategic growth initiatives. Here’s what investors need to know:

1. Dr. Julian Ong’s Return and Revenue Impact

• Recovery Underway But Not at Pre-Suspension Levels: Dr. Julian Ong, a key revenue contributor, returned to practice in December 2024 after a suspension. His clinic’s revenue has shown improvement in the four months since his return, but has yet to reach pre-suspension highs due to lingering reputational effects.
• Resilience During Suspension: Notably, the Group maintained robust financial performance and continued profit growth during Dr. Ong’s absence, underscoring the resilience and adaptability of HC Surgical’s business model.

2. Dividend Policy and Financial Position

• Debt-Free and Cash-Generating: The company remains debt-free with strong cash inflows.
• Dividend Policy Update: Originally, the company committed to a 70% payout ratio for the first three years post-IPO. Currently, management prioritises cash retention to fund acquisitions, balancing investment in growth with shareholder returns.
• Payout Decisions Going Forward: Future dividends will be determined by operational needs and acquisition opportunities, with borrowing only considered if absolutely necessary.

3. Nurse Turnover and Labour Costs

• Over 30% Nurse Turnover: The company experienced high nurse turnover, attributed to performance issues and the need for rigorous quality standards. This has the potential to impact patient safety and cost structures.
• Mitigation Strategies: To address this, HC Surgical implements a three-month training and evaluation period, retaining only those who meet high clinical standards. Some nurses are compensated above market rates due to expanded roles such as handling medical licensing.
• Stable Staffing and Ongoing Training: Despite the high turnover, current staffing levels are stable, with a continuous focus on recruitment and retraining to ensure operational continuity.

4. Strategic Growth and Expansion Plans

• Acquisition-Driven Growth: The company’s strategy centres on acquiring majority stakes in medical practices and gradually increasing ownership to 100%. This approach is designed to maximise profit capture as the acquired businesses grow.
• Exploring Overseas Markets: While domestic growth remains a priority, HC Surgical is actively evaluating overseas opportunities. A recent due diligence exercise in Vietnam was halted, reflecting management’s measured and prudent approach to international expansion.
• Selective Overseas Expansion: Longer-term, the company targets expansion into day service centres for orthopaedics and other specialties, but explicitly rules out capital-intensive hospital projects.
• Network Synergy and Doctor Collaboration: The company’s model assigns doctors to specific centres with joint responsibility for costs and profits, fostering accountability and patient loyalty. There is a deliberate effort to avoid internal competition among doctors and to promote cross-specialty collaboration.

5. Ten-Year Journey: From Startup to Market Leader

• Origins and Achievements: HC Surgical’s journey began with informal collaboration among founding doctors, leading to the establishment of its first scope centre in Tampines. The company’s innovative model – providing endoscopy services in HDB settings at competitive prices – proved both profitable and scalable.
• Regulatory Milestones: HC Surgical achieved a significant first by securing MOH accreditation for endoscopies with sedation in a GP clinic setting.
• Current Network and Services: Today, the Group operates 11 endoscopy centres, offering a range of surgical and medical services across general surgery, orthopaedics, GP, and home care.
• Medium- and Long-Term Objectives: The company aims to enhance business synergies through selective recruitment of specialists and disciplined overseas expansion, focusing on outpatient and day surgery models.

Potential Price-Sensitive Highlights for Shareholders

• Dr. Julian Ong’s Revenue Recovery: Ongoing improvement but still below historical highs may continue to impact revenue growth trajectory in the near term.
• Dividend Policy Shift: A move away from the previous 70% payout ratio signals a stronger emphasis on growth through acquisitions, which could affect dividend expectations for income-focused investors.
• Active M&A Pipeline: The company’s strategic focus on acquisitions and cautious approach to overseas expansion could be a catalyst for future earnings growth or volatility, depending on execution.
• Labour Costs and Staffing Challenges: High nurse turnover and increased compensation for expanded roles could impact operating margins if not managed effectively.

Investor Outlook

HC Surgical Specialists continues to demonstrate operational resilience, strategic adaptability, and prudent financial management. The company’s focus on acquisition-led growth, careful overseas expansion, and cost control positions it for long-term value creation. However, investors should closely monitor the recovery trajectory of key revenue contributors, the evolving dividend policy, and the management of labour costs, as these factors could drive share price volatility going forward.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any securities. Investors should conduct their own research or consult a qualified financial advisor before making investment decisions.

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