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Singapore Paincare Swings To Net Loss In FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome back to the Deep Dive. You know how we operate here,
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  taking those dense financial reports, kind of slicing through the jargon and
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  giving you the insights you need.
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  Today, we're tackling the latest from Singapore Pain Care Holdings Limited, or SPCH.
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  Specifically, there are unaudited results for the year ending June 30th,
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  2025, and, well, confirmation of that profit warning.
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  Exactly. And our mission today, it's really crucial. We're not just reading
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  out the numbers, though they are stark.
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  SPCH saw this huge swing, I mean, over $6 million on their net performance.
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  We need to get beyond that initial shock. We've got to understand the fundamental causes.
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  Why this big reversal? Where did the value actually go? And does their strategy
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  going forward really address the hit they've taken?
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  Okay, right. Let's frame that challenge right away. The key takeaway,
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  confirming that October profit warning, is this massive flip.
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  They went from making money to, well, posting some pretty significant losses.
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  That's the core story. The swing is dramatic.
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  In FY 2024, SPCH reported a net profit after income tax of about S2.38 million dollars.
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  But fast forward to FY 2025, and that's completely gone.
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  It turned into a net loss of S3.74 million dollars. Wow, that $6 million negative
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  shift. That's painful, no pun intended.
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  And for you, the shareholder, the actual loss attributable to the company owners
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  was even steeper, right?
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  S4.03 million dollars in the red. Yeah, compared to almost 2 million profit
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  the year before, it's a major turnaround.
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  But interestingly, when you look at the revenue, the top line,
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  it didn't just collapse. No, and that's key.
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  Total revenue only decreased by about 3.5%. It went from S26.91 million dollars down to $25.97 million.
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  So that immediately tells you something important. This huge loss wasn't because
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  patients suddenly stopped coming through the door entirely.
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  It points towards, well, structural changes in costs being the real culprits here.
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  Okay, so what were those structural changes? What caused that sort of minor
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  dip in revenue? Was it the main pain clinics having issues? Well,
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  according to the documents, it seems the dip was mostly structural.
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  They actually sold off some GP clinics, GM Medical and AE Fernvale are mentioned,
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  and they also wound down ready fit physiotherapy.
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  Ah, OK. Now, the core specialist clinics, their revenue actually went up,
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  but these disposals kind of canceled out those gains, leading to that slight overall drop.
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  So, stable-ish top line, but the bottom line just cratered.
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  Exactly. And a blow like that always ripples through the balance sheet.
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  Yeah, I see the net asset value per share, the NAV, that kind of underlying value metric.
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  It dropped from something towards some 13 cents to something along 11 cents.
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  Not huge, but noticeable. It's a direct result of those losses eating into the company's equity.
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  Total equity fell from S$23 million to under some $19 million.
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  I mean, when you post a loss that big, your NAV naturally shrinks because the
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  company's accumulated value is being used up.
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  Right. So if revenue wasn't the main driver, we really need to zoom in on the
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  costs and the investment side of things.
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  Let's start with what they call non-cash impairments.
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  That often sounds like accounting jargon for cleaning house,
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  right? That's often exactly what it is. And this is where the story gets really, really interesting.
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  It's where a huge chunk of that S6 million dollar swing comes from.
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  The biggest single factor.
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  Impairment of good wear. A massive S2.66 million dollar charge just popped up in FY 2025.
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  Okay, hold on. For listeners maybe not deep in accounting weeds,
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  what exactly is goodwill and why does impairing it cause S2.66 million dollars of pain?
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  Is it actual cash loss? Good question.
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  It's not immediate cash out the door, but it reflects past cash spent badly.
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  Goodwill is basically the extra price you pay when you buy a company above the
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  fair value of its identifiable assets like buildings or cash.
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  Think of it like buying a small, popular local shop.
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  You pay for the shop itself, the stock, but you also pay extra for its good
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  name, its loyal customers. That's the goodwill.
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  Now, if later you realize that shop isn't performing, maybe a big competitor
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  opened nearby in its future earnings potential tanks, you have to admit that
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  extra premium you paid, that goodwill, isn't worth anything anymore.
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  You impair it, write it off as a loss on your books.
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  Got it. So this S2.66 million dollar goodwill charge is SPCH basically saying,
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  oops, we overpaid significantly for some past acquisitions.
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  And specifically, they linked it to PTL Spine and Orthopedics and AE Medical
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  Seng Kang, noting their loss making now. That's exactly it.
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  It's an admission that those M&A deals didn't deliver the expected value, a major write down.
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  And we see a similar, though smaller trend with physical assets, too.
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  The impairment loss on plant and equipment jumped from $7.2 million to $17.61
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  million, again linked to those underperforming clinics.
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  Okay, so failed acquisitions locally. What about their overseas ventures?
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  They had investments outside Singapore, too, right? Yes, and that's another
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  area where things went south significantly.
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  Their joint venture, Singapore Pain Care Capital, swung wildly.
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  It went from making $7.58 million in FY 2024 to losing $7.73 million this year.
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  And the report fingers a revaluation loss on an investment in Puxiang is the main reason. Ouch.
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  And it doesn't stop there. Their associate investments think Shanghai Gong Pu, Beijing Puxin,
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  They also flipped from a small profit contribution to a loss.
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  So they were taking hits on international investments as well.
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  Right. So a clear picture emerging.
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  Cleaning up bad investments, both local M&A and overseas ventures,
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  drove these huge non-cash losses.
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  But what about just the regular day-to-day running of the business?
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  Were costs under control while all this balance sheet cleanup was happening?
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  Well, no. And this is where it gets a bit complex strategically.
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  Operational costs were actually rising quite sharply.
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  Employee benefits expense, for example, jumped by almost $7.79 million.
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  The report says this was due to both hiring more people, new doctors,
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  new staff, and paying people more.
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  Hang on a second. If they're writing down the value of clinics because they're
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  loss-making, why hire more staff and increase pay at the same time?
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  Seems counterintuitive.
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  It does, but it reflects that split reality we talked about.
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  While some parts of the business, maybe the older or required parts,
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  were failing and being written down, they were likely trying to actively build
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  up their core profitable specialist centers, which requires staffing them properly.
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  Okay, maybe. What else? Other expenses also rose by about $2.43 million.
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  And here, they specifically call out increases in consultancy fees and marketing fees.
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  Consultancy and marketing? For what? The notes mention things like rebranding,
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  advertising campaigns, initiatives to raise awareness, and interestingly,
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  activities related to forays into overseas markets. So let me get this straight.
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  They're spending more on consultants and marketing, including for overseas expansion.
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  At the exact same time, they're booking massive losses on previous overseas
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  investments and writing down local clinics.
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  That seems to be the strategic tightrope they're walking, yes. Yeah.
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  It looks like they decided FY 2025 was the year to clear out the skeletons of
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  past bad investments, while simultaneously spending heavily to try and kickstart
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  growth for the future, maybe with a different focus. Okay.
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  So the short-term result is a double whammy. Big write-offs from the past,
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  plus new spending for the future, all hitting the bottom line at once. Precisely.
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  Which magnifies the reported loss significantly. All right, that leads us to
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  the company's overall financial health.
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  Given these losses and the increased spending, how is their cash situation looking?
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  Are they burning through reserves?
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  The cash flow statement definitely shows the strain. Cash and cash equivalents
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  actually decreased by, yes, $1.65 million over the year.
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  They ended FY 2025 with about $5.2 million in the bank. And to manage this?
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  Critically, the report notes they had to draw down a new non-current bank loan,
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  specifically for working capital needs.
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  Non-current. So, long-term debt, meaning they took on more borrowing.
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  Correct. Non-current means it's not due within the next year.
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  They increased these longer-term bank borrowings by S1.2 million dollars.
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  It signals they needed more financial runway, more flexibility to fund ongoing
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  operations, and this strategic shift they're attempting. Did they pay down any debt?
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  Yes, they did pay down about Sitter Point 93 million dollars in current bank
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  borrowings, short-term stuff.
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  But the net effect seems to be an increased reliance on borrowing,
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  particularly longer-term, to navigate this rough patch.
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  Okay, and we can't forget those external factors they mentioned.
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  Something about insurers.
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  Absolutely critical context. SBCH explicitly points to a tightening of the claims
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  process by insurance companies.
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  This includes things like making it harder for the clinics to get impaneled, basically.
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  Approved to treat patients under certain insurance plans and insurers,
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  reducing the fee benchmarks, meaning paying less for procedures.
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  Right. So even if patient numbers are OK, getting paid fully by insurers is becoming tougher.
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  Exactly. It puts a squeeze on revenue potential for everyone in the sector,
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  making it even harder for clinics that might already be struggling financially.
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  It's a significant headwind. So you add it all up, massive impairments,
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  rising operational costs, this external insurance pressure.
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  The decision on dividends seems pretty clear, unfortunately, for shareholders.
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  Yeah, it was almost inevitable, really. The board stated they recommended no
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  dividend for FY 2025, and they were very clear why, citing the group's poor
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  financial performance and, crucially, the need to conserve cash.
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  They need that capital for working capital and for their short and medium term
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  commitments. Which basically means funding that turnaround strategy we've been discussing.
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  Exactly. They need every dollar they can keep to try and make this pivot work.
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  Okay, so speaking of that pivot, let's get into the specifics.
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  What exactly is management betting on to get back to profitability?
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  The big push seems to be around digital transformation and partnerships.
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  They're quite vocal about pursuing a major digital initiative.
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  This includes acquiring AI technologies.
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  And remember that partnership with Ucrest announced back in October 2024.
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  They're operating their own digital app through that. Ah, right.
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  So less focused perhaps on just buying more physical clinics,
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  more on tech. That seems to be the direction.
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  It's a clear strategic shift towards leveraging technology. And can we see this
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  investment hitting the books already?
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  Yes, you can. If you look at the balance sheet, prepayments increased by $6.62 million.
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  And the report explicitly connects this increase to consultation fees and medicines
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  that were prepaid as part of acquiring that AI technology.
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  So real money going out the door now for this future tech play.
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  Correct. It shows the digital strategy isn't just talk. It's actively consuming
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  capital right now. Okay, so they're divesting some older assets, investing in AI.
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  What does the actual physical network look like today after those disposals?
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  Currently, the footprint listed is 10 GP clinics, five specialist centers,
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  and two other facilities, one for traditional Chinese medicine,
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  TCM, and one for health screening.
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  And importantly, management adds that they're still open to synergistic partnerships,
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  both locally and, interestingly, regionally, to, quote, extend and replicate
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  its pain care ecosystem.
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  Hmm. Replicate regionally again, despite the recent write-offs on overseas ventures.
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  That's bold. It certainly shows ambition or perhaps confidence that they can
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  execute better this time around, maybe with a different model.
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  Okay, nearly wrapped up, but there's one more detail we need to touch on something
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  noted as a subsequent event. Often these involve governance or leadership things.
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  That's right. And this one involves the executive chairman and CEO, Dr. Li.
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  Subsequent to the financial year end, the company disclosed that claims had
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  been filed against it by a Mrs. Lim Saoyuan.
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  The claims are for alleged amounts due to her. Some are between S$350,000 and
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  S$450,000, apparently stemming from personal financial arrangements she had with Dr. Lee.
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  Personal arrangements leading to a claim against the company.
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  How does the company view this? The board's position is clear.
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  They state the claims are without merit.
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  And crucially, they note Dr. Lee has provided a voluntary indemnity to the company.
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  Meaning he's essentially guaranteed to cover any potential loss the company
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  might suffer from this claim up to S-450,000, and he's provided security for that amount.
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  This is conditional on him being allowed to manage the defense against the claim.
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  Okay, so the company feels financially protected, but it still raises questions
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  around leadership, doesn't it?
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  It inevitably does. While the board expresses confidence the group won't face
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  a financial liability, this kind of disclosure always adds a layer of governance
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  scrutiny that investors should be aware of and monitor. Right.
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  So let's try and pull all these threads together.
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  What we've seen in these reports is this real tension, isn't it?
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  On one hand, SBCH had a year dominated by cleaning house these massive non-cash losses from...
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  Frankly, failed clinic buys and struggling international ventures.
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  That's the past catching up. And that pain was compounded by rising operating
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  costs and those tough external insurance pressures making life harder.
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  But then, on the other hand, you see this very clear, very capital-intensive bet on the future.
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  They're taking the cash they've conserved, partly by not paying dividends,
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  and pouring it into digital transformation, AI tech, and potentially new partnerships.
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  So they used this bad year, this profit-warning year, to basically take all
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  the medicine at once for past mistakes.
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  While simultaneously trying to pivot hard towards a tech-enabled,
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  possibly more regional future.
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  Understanding these financials is really about seeing that trade-off.
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  It was a year of significant financial pain, arguably necessary pain,
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  to set up a shot at future relevance through technology.
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  A moment of costly strategic realignment, perhaps. I think that sums it up well.
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  Which brings us to a final, maybe provocative thought for you,
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  our listener, to consider.
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  Given how badly burned they seem to have been by those specific international
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  investments they wrote off, the ones in Shanghai, Beijing, Puxiang,
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  and yet they're still talking about regional expansion, replicating the ecosystem overseas. Yeah.
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  How absolutely critical is it that they nail the domestic digital transformation first?
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  Does success at home proving the tech model works become the absolute prerequisite
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  before they can even realistically try or afford to take another run at expanding overseas?
• 14:09
  That's a great question. Maybe success at home is the only way they can earn
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  the right and find the resources to fund those regional ambitions this time around.
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  Lots to think about there. Music.