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The Edge 25-10-2010


BY Aishah Mustapha
For some time now, KPJ Healthcare Bhd has talked seriously about entering the retirement homes business.
It finally did so last month by acquiring a 51% stake in Australia-based Jeta Gardens Waterford Trust (JGVVT) for RM19 million of internally generated funds.
The group's associate company KPJ Al-'Aqar REIT then announced the acquisition of all 14.75ha of properties owned by JGWT for RM134.9 million. These properties are to be injected into the REIT. This exercise will be paid for half in cash and half via the issue of new units in the REIT.
JGWT owns an Asian-themed retirement resort called Jeta Gardens, which houses an aged care facility, retirement homes and apartments in Bethania, Queensland. However, it is running at a loss. For FY2009 ended June 30, JGWT posted an audited net loss of A$3.1 million (RM9.1 million) and net liabilities of A$1.8 million.
However, notes OSK Investment Research in a recent report, Jeta Gardens is still considered to be in a gestation period as it was opened only three to four years ago.
"Although JGWT is loss-making, KPJ expects it to become profitable once the injection of its assets into Al-Aqar REIT is completed, given that the company's present losses are largely due to high finance charges arising from sizeable borrowings incurred in setting up the business," says the research outfit.
As Jeta Gardens still possesses undeveloped properties, KPJ managing director Datin Paduka Siti Sa'diah Sheikh Bakir says there is room to grow the business. "We plan to expand Jeta's retirement homes, which is why we acquired the majority share, for the opportunity to expand.

Datin Paduka Siti Sa'diah Sheikh Bakir

"We always want to be innovative and set a trend of offering services that are good and exciting for the  population in the country, in this case, the aged," says Siti Sa'diah in an email.
Another reason for the acquisition is the absence of a viable local business model for retirement homes. Retirement homes in the country are mostly owned and run by private companies or charitable organisations. Thus, the acquisition of Jeta Gardens offers KPJ the chance to learn the business. It plans to replicate the Australian model here five years down the road.
Its ageing population and declining birth rates make Australia a good example for retirement homes. According to a market report by research outfit Ibisworld, the country's nursing home revenue stood at A$8.6 billion last year. In Asian culture, however, it is still relatively unacceptable for children to send their parents to nursing homes. Typically, parents live with their children until the end of their lives. This could pose a problem for KPJ when it starts its retirement home venture in Malaysia.
Siti Sa'diah believes, however, that the Asian retirement home market is catching up with those in the west, which are more mature More importantly, the market that KPJ is chasing is very unlike most local old folks homes.
Siti Sa'diah says: "Asia is a huge market for retirement planning. Currently, there is a huge Baby Boomer (born between 1946 and 1965) market in Asia and this generation of well educated and affluent people will
have greater interest in healthcare and wellness and retirement homes. We believe people's perception of retirement has changed since the days of our forefathers.
"Unlike the traditional old folks homes you see, these retirement homes of the future [referred to as retirement resorts] are set in scenic gardens and parklands with various facilities and activities to cater for the community. To top it off, medical and health services are readily available for those who seek to live independently and want care on demand or assisted living."
An industry observer says KPJ's plan to integrate its local retirement resorts with its existing network of hospitals will work well for the group. "It is only natural for them to put the two together. If they can combine a scheme that ties in with an insurance plan, it would complete the package. Our population is ageing. There are more senior citizens today than, say, 50 years ago. That says a lot."
The world's population is living longer, owing to better healthcare and quality of life, a falling birth rate, smaller families and increased wealth. Judging by the national census, Malaysia's population is also growing old. As at July 2, elders aged 65 and above made up 4.7% of the country's population of 28.25 million, up from 4.3% in 2006. In contrast, children aged 15 and below accounted for 27.2%, compared with 29.2% in 2006.
Already, a Bill on senior citizens is being drafted for tabling in Parliament, according to Deputy Women, Family and Community Development Minister Senator Heng Saei Kie. The Bill is supposed to tackle the challenges of an ageing population, which Malaysia is projected to have by 2015. It will seek to provide more old folks homes, healthcare services and physical facilities.
An ageing population is one in which senior citizens aged 60 and above comprise more than 10% of the population. It was also announced in Budget 2011 that the RM5,000 tax relief for medical expenses covering caretakers, homecare and other daily needs would be extended to taxpayers' parents starting next year. For KPJ, all these developments could be a blessing in disguise. It cannot be denied that times have changed and Asian parents have become less dependent on their children in their old age.