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QuestionsCategory: Management QuadrantISEC HEALTHCARE directors remuneration
Ang Henry asked 4 years ago

Hi, I’ll like to confirm the following to ensure I am not seeing things.
Based on the 2016 annual report the total remuneration that the directors received from page 21 I have calculated the total is 3 million as I want to be on the conservative side. On the other hand their net profit on page 41 is around 6 million after deducting one off gains. Based on the percentage the directors’ remuneration is about half of the profits which I feel is excessive.
Kindly confirm and advise if I am see things wrongly. Thanks in advance.

Ang Henry replied 4 years ago

On the other hand I have found out that the directors fees listed in page 80 is 210k, therefore which remuneration structure should I select in this case?

1 Answers
Victor Chng answered 4 years ago

Hi Henry,
 
If you look at the remuneration table on page 21 as follow:
Lim Wee Hann, Professor Low Teck Seng & Sitoh Yih Pin took only director fees while the rest did not so their amount should be figure that you found in page 80 which is about $0.21 million.
To be conservative the following directors just assume the max remuneration as follow:

Dr Lee Hung Ming – $1 million

Dr Wong Jun Shyan –  $1.25 million

Macy Thong – $0.25 million
Dr Alan Ang Jin Soon – $0.5 million

Dr Fang Seng Kheong – $0.75 million

Dr Choong Yee Fong – $1 million

By adding all the figure together including the director fee should work out around $4.96 million

You are right that the profit after exception items should be around $6m which work a ratio of 83% of their total profit based on director fee but if you divided it by revenue the percentage is only 16.1%. 

Most of the time medical companies tend to pay their Doctor high salary so it may be a norm in the industry which is why the profit % is high. I think compared it with revenue is more appropriate. It is best to compare with similar player also to get a gauge how the industry is paying.  

Ang Henry replied 4 years ago

Hi Victor,

With regards to your response I have some doubts to clear

1. How come compare the remuneration over revenue as compared to (net) profit as what you guys always advocate?

2. Why does medical companies tend to pay their doctor(s) high salary?

3. As for now this is the only player with the specific niche of eye-care. If I were to look for similar medical companies they are Raffles Medical Group, Q&M and IHH Healthcare. Do you feel comparing the ratios of ISEC with the companies I have mentioned appropriate?

Victor Chng replied 4 years ago

Hi Henry,

Doctors are usually highly paid in their industry. If you look at raffles medical, their directors are also receiving high salary. Some industry where the staff cost are the major cost, we usually use revenue instead of profit.

The important things is to know what is the medical industry average range so using raffles medical, Q&M, IHH would be good things.