KUALA LUMPUR (Sept 18): KYM Holdings Bhd (KL:KYM) is planning to acquire a 70% stake in orthopaedic and specialist healthcare group Regen Healthcare Sdn Bhd, which marks its entry into the healthcare sector and diversifying its manufacturing-dominated earnings base.

In a filing on Bursa Malaysia, KYM said its wholly-owned unit KYM Healthcare Sdn Bhd signed a conditional share sale agreement with Regen Healthcare’s sole shareholder Dr Rajesh Singh Karnail Singh to acquire 700,000 shares for an indicative amount of up to RM33.5 million cash.

Regen Healthcare operates a specialist orthopaedic and dental clinic, two physiotherapy centres and an ambulatory surgical centre across Petaling Jaya and Kuala Lumpur, staffed by 17 consultants. 

According to the filing, Dr Rajesh is an orthopaedic specialist who has helmed Regen Healthcare since 2015 and will retain the remaining 30% stake and continue as group medical director under a five-year employment contract to be signed as one of the deal’s conditions.

KYM said the purchase price comprises a RM9.1 million initial payment due to completion, and an earn-out of up to RM24.4 million tied to Regen Healthcare’s average audited profit after tax for the financial years ending Dec 31, 2026 and 2027. 

It said that no earn-out is payable if the average profit comes in at RM1.3 million or below, which is roughly in line with Regen Healthcare’s 2025 profit. The payout scales upward the higher the average profit, which is capped therefore total consideration cannot exceed RM33.5 million.

For 2025, Regen Healthcare’s revenue fell by 11.9% to RM11.3 million on lower patient volume, with profit after tax slipping by 36.6% to RM1.29 million. It said that a dormant Australian subsidiary is to be deregistered or divested before completion of the acquisition. 

Independent valuer QuantePhi Sdn Bhd assessed the deal using two methods: a comparison against six listed healthcare peers, which put fair value at 10.4 to 25 times earnings after a 25% illiquidity discount, and a review of six precedent healthcare acquisitions over the past six years, which implied 15.27 to 20.5 times. 

On that basis, the valuer and KYM's board said they consider the price as “fair”, noting the implied multiples fall at or below the low end of both ranges.

KYM’s manufacturing segment, which comprises the sale of multi-wall industrial paper bags and corrugated fibreboard, accounted for nearly all of its RM80.8 million revenue and RM1.0 million profit after tax in the year ended Jan 31, 2026.

KYM said the acquisition is aimed at reducing reliance on that single segment because the healthcare business is expected to eventually account for more than 25% of the group's net profit or assets.

“The proposed acquisition enables the enlarged KYM Group to expand its corporate presence and broaden its asset portfolio by leveraging on Regen’s established expertise, clinical resources and track record in operating healthcare activities, delivering specialised medical services and managing healthcare-related activities,” said the group in the filing. 

The proposed diversification requires shareholders' approval at an extraordinary general meeting, and the acquisition itself is conditional on that diversification being approved.

The group flagged several risks, including its lack of prior experience running a healthcare business, potential goodwill impairment, and dependence on Dr Rajesh given that certain regulatory licences are held in his name rather than the corporate entity. 

Hong Leong Investment Bank Bhd is the principal adviser on the deal, which KYM expects to be completed in the first quarter of 2027.

Shares of KYM were up by half a sen or 1.6% to 31 sen at Friday’s trading day break, giving the group a market capitalisation of RM47.3 million.