Industry Overview

6. INDUSTRY OVERVIEW AND OUTLOOK 6. INDUSTRY OVERVIEW AND OUTLOOK
SMITH ZANDER INTERNATIONAL SDN BHD (1058128-V) Suite 23-3, Level 23, Office Suite, Menara 1MK, Sl\/lITH ZANDJER 1 Jalan Kiara, Mont’ Kiara, 50480 Kuala Lumpur, Malaysia. T +6036211 2121
The Board of Directors LKL International Berhad Third Floor, No. 79 (Room A) Jalan SS21/60 Damansara Utama 47400 Petaling Jaya Selangor Darul Ehsan Dear Sirs/Madam, Executive Summary of the Independent Market Research Report on the Healthcare Industry, Healthcare Services Industry and Medical Bed, Peripheral and Accessory Industry This Executive Summary of the Independent Market Research Report on the Healthcare Industry, Healthcare Services Industry and Medical Bed, Peripheral and Accessory Industry has been prepared by SMITH ZANDER INTERNATIONAL SDN BHD (“SMITH ZANDER”) for inclusion in the Prospectus in conjunction with the listing of LKL International Berhad on the ACE Market of Bursa Malaysia Securities Berhad. For and on behalf of SMITH ZANDER:
MANAGING PARTNER
1 INTRODUCTION Objective of the Study This Executive Summary of the independent market research (“IMR”) report has been prepared in conjunction with the listing of LKL International Berhad on the ACE Market of Bursa Malaysia Securities Berhad. The objective of this report is to provide an independent view of the industry(ies) and market(s) which LKL International Berhad operates in and to offer a dear understanding of the industry and market dynamics. Rationale and Scope of Work LKL International Berhad is principally involved in the design, manufacturing and sale of medical/healthcare beds, peripherals and accessories, and trading of medical/healthcare peripherals and accessories. The end-users of its products are largely hospitals and medical centres, as well as other healthcare related facilities such as clinics and specialist institutions (i.e. fertility centres, diagnostics centres, eye specialists, orthopaedic centres, chiropractic centres, dialysis centres, confinement centres and nursing centres). The scope of work for this report will thus address the following three (3) areas: (i) The healthcare industry, which is the broader sector in which LKL International Berhad operates;
(ii) The healthcare services industry, which is the end-user industry served by LKL International Berhad and is a sub-sector of the healthcare industry; and

(iii) The medical bed, peripheral and accessory industry, which is the specific industry in which LKL International Berhad operates and is also sub-sector of the healthcare industry. Healthcare-related statistics presented in this report have been segmented by region to highlight the growth potential of LKL International Berhad’s key export markets (i.e. developing Asia and developing Middle East and Africa); with statistics on selected developed countries shown as comparison. [The rest of this page is intentionally left blank]
2 INTRODUCTION TO THE HEALTHCARE INDUSTRY
The healthcare industry comprises healthcare service providers and healthcare product manufacturers. Healthcare service providers are involved in the provision of healthcare services and healthcare support services. Healthcare services refer to consultation, diagnostic, patient care and medication services for the prevention or treatment of diseases, ailments, injuries or other physical and psychological health conditions, while healthcare support services refer to the provision of support and management functions that are the back-end operations of healthcare service providers. (Please refer to Chapter 3 -The Healthcare Services Industry of this IMR report for further details on the healthcare services industry.) Meanwhile, healthcare product manufacturers can be segmented into manufacturers of pharmaceutical products, and hospital furniture and equipment. Pharmaceutical products refer to prescription drugs, over­the-counter products, health supplements and botanical drugs. On the other hand, hospital furniture and equipment refer to medical equipment and devices, and medical beds, peripherals and accessories. Medical equipment and devices include electronic equipment, instruments, apparatus and material substances used for diagnosis, monitoring, treatment and prevention of diseases, ailments, injuries or other physical and psychological health conditions. On the other hand, medical beds, peripherals and accessories comprise medical beds (such as electric beds, hydraulic beds, manual beds and delivery beds) and medical peripherals and accessories (such as patient transport trolleys, examination tables, medical carts, overbed tables and instrument trolleys). (Please refer to Chapter 4 -The Medical Bed, Peripheral and Accessory Industry of this IMR report for further details on medical beds, peripherals and accessories.) Hospital furniture and equipment, which include medical equipment and devices as well as medical beds, peripherals and accessories, are essential supplies to support the provision of healthcare services. The segment that is of interest in this report is the segment which LKL International Berhad operates in, i.e. the medical bed, peripheral and accessory industry segment, as well as the key end-user industry to the medical bed, peripheral and accessory industry, i.e. the healthcare services industry. Segmentation of the healthcare industry, 2015
Notes: ~ _~ ::.] Denotes the industry which LKL International Berhad is principally involved in. C]Denotes the key end-user industry to the medical bed, peripheral and accessory industry.
Source: SMITH ZANDER 2

3 THE HEALTHCARE SERVICES INDUSTRY Definition and Segmentation The healthcare services industry refers to the provision of consultation, diagnostic, patient care and medication services for the prevention or treatment of diseases, ailments, injuries or other physical and psychological health conditions. The healthcare services industry consists of: • Primary care health centres, clinics and pharmacies: provide basic healthcare services to the general public, which includes administering first-aid for injuries and dental services. Services are delivered by primary care physicians, nurses or family doctors on an outpatient basis.
• Secondary care specialist clinics, hospitals and medical centres: provide consultation by medical specialists to patients, usually upon referral from health centres, clinics or pharmacies. Services may be delivered on an inpatient or outpatient basis, and these facilities allow for diagnostic, inpatient treatment and general surgeries.
• Tertiary care specialist hospitals and medical centres: provide specialist consultative care, inpatient care, and advanced treatment or complex surgery such as cardiac surgery, neurosurgery, reconstructive surgery and cancer treatment, and thus these facilities allow for complex medical interventions.

Generally, the healthcare services industry comprises both public and private healthcare sectors: • Public healthcare sector: is the foundation for a country’s healthcare service structure. It refers to healthcare services provided by the government, typically through appointed ministries or administrative bodies. The services provided are funded through public sector budgets, national insurance schemes and/or universal healthcare programmes.
• Private healthcare sector: comprise both businesses and not-for-profit organisations. Private healthcare funding typically comprise out-of-pocket expenditure or private insurance plans, and in some countries, funds from national or social insurance.

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The healthcare services environment in each country varies in terms of public-private healthcare sector mix, level of healthcare financing and national healthcare policies, due to differences in political and social contexts and values within each country. The levels of healthcare financing available, and the types of national healthcare policies related to these healthcare financing levels, are as illustrated below: Level of healthcare financing (Global), 2015 Limited or no financial coverage  Healthcare dominated spending  by  expenditure out-of-pocket
Intermediate financial coverage -Mix of community-, cooperative-, and enterprise-based health insuranc,e and other private health insurance; and/or Social health insurance for specific groups and limited tax­based financing Universal financial coverage -Tax-based financing; -Social health insurance; or Private health insurance companies, with regulations and subsidies to ensure universal coverage Source: SMITH ZANDER Generally, under-developed and developing countries such as countries in Asia including Malaysia, Vietnam, the Philippines, India and Pakistan, and countries in Middle East and Africa including Kenya, Ghana, Zimbabwe and Bahrain, fall within the first two (2) levels of healthcare financing; i.e. limited or no financial coverage, or intermediate financial coverage. Developing countries have a higher number of public clinics and hospitals than under-developed countries, and these facilities are usually concentrated in urban or central areas. Developed countries also have a growing number of private clinics and hospitals which are usually targeted at high income level population. In Malaysia specifically, where intermediate financial coverage is offered, specific groups such as public sector employees and their dependents are exempted from all charges, or are charged minimal charges, for healthcare services in public healthcare service facilities. Public healthcare service facilities are nonetheless offered to the whole population, and are highly subsidised through tax collections and other government income, which are mainly channelled to the Ministry of Health (“MOH”) Malaysia through annual budgetary allocations or five (5)-year frameworks. Meanwhile, developed countries tend to offer universal financial coverage to their citizens, though the national healthcare policies may differ in terms of financing avenues, i.e. tax-based financing, or social health insurance, or through private health insurance companies with regulations and subsidies set out (in order to ensure universal coverage and non-discrimination based on medical history or existing conditions), or a mixture of these policies. In countries which practice tax-based financing, such as the United Kingdom and Canada, all, if not most, healthcare services are financed primarily through general taxation. Meanwhile, countries which practice social health insurance include France and Germany, and these countries have social insurance systems which are financed through employer-employee payroll taxes and central taxes. An example of a country which practices universal financial coverage through private health insurance companies is Switzerland. These countries have different compositions of public and private healthcare service facilities, though most of these countries have a higher composition of public healthcare service providers as compared to private healthcare service providers. However, it should be noted that not all developed countries offer universal financial coverage to their citizens. The United States of America (“United States”) is an example of this exception, where the country does not have a national healthcare system, but rather a variety of public and private institutions that regulate and deliver healthcare services. While there are national financial coverage for specific groups of the population, a majority of its population are covered via insurances provided by employers. 4
The Global Healthcare Services Industry In the context of this report, healthcare expenditure refers to total expenditure on public and private healthcare products and services. Healthcare expenditure has been growing across global regions, illustrating that there is growing accessibility to healthcare services, coupled with a growing need for healthcare services due to increasing standards of living and rising population, the growing ageing population, as well as rising prevalence of chronic diseases. Overall, the global healthcare services industry grew, in terms of total healthcare expenditure, from USD4.3 trillion (RM16.3 trillion1) in 2004 to USD7.5 trillion (RM23.6 trillion2) in 2013, registering a healthy Compound Annual Growth Rate (“CAGR”) of 6.4% during the period. SMITH ZANDER forecasts global healthcare expenditure to increase from an estimated USD8.1 trillion (RM26.5 trillion3) in 2014 to USD10.0 trillion (RM39.1 trillion4) in 2017, at a CAGR of 7.3% during the period. Healthcare expenditure (Global), 2004-2017(f)
Note: * CAGRs and forecasts have been computed by SMITH ZANDER. Source: World Bank, *SMITH ZANDER analysis 1 Exchange rate from USD to RM in 2004 was converted based on average annual exchange rates in 2004 extracted from published information from Bank Negara Malaysia at USD1=RM3800 2 Exchange rate from USD to RM in 2013 was converted based on average annual exchange rates in 2013 extracted from published information from Bank Negara Malaysia at USD1=RM3.1511 3 Exchange rate from USD to RM in 2014 was converted based on average annual exchange rates in 2014 extracted from published information from Bank Negara Malaysia at USD1=RM3.2736 4 Exchange rate from USD to RM in 2017 was converted based on average annual exchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD1=RM3.g073 5

 

SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d) Regionally, over the last decade, healthcare expenditure per capita in North America increased from USD6,073 (RM23,0775) in 2004 to USD8,803 (RM27,7396) in 2013, growing at a CAGR of 4.2% over the same time period, while Healthcare expenditure per capita (Middle East and Africa, Asia healthcare expenditure per capita Pacific, Europe and North America), 2~0~<:l1l~~~~3
CAGR 4.2%*B2004 ” 2013 CAGR CAGR 4.1%* 8.9%* ICAGR 9.9%*
co co co <0 N ~
Middle East and Asia Pacific Europe North America ~ . Developmg countries Developed countnes ~_.. . .. .. Note: CAGRs pertain to the period between 2004 and 2013
* CAGRs have been computed by SMITH ZANDER. in Europe grew from USD1,648 (RM6,2625) in 2004 to USD2,370 (RM7,4686) in 2013 at a CAGR of 4.1 %. Meanwhile, Asia Pacific illustrated a CAGR of 8.9% in terms of total healthcare expenditure per capita, growing from USD288 (RM1 ,0945) in 2004 to USD618 (RM1,9476) in 2013. Total healthcare expenditure per capita in the Middle East and Africa also grew, as it increased from USD1 08 (RM41 05) in 2004 to USD252 (RM7946) in 2013, at a CAGR of about 9.9%. Much of the growth in global healthcare services is attributed to growth from emerging economies in Asia Pacific, Middle East and Source: World Bank, *SMITH ZANDER analysis Africa, as rising standards of living, population and urbanisation rates are prevalent in these economies. The emerging economies have been either largely underserved and are experiencing large capacity building, or actively upgrading their healthcare systems. In these economies, healthcare expenditure is driven by factors such as prevalence of chronic diseases, growing ageing population, increasing accessibility to healthcare services due to growth in income and/or an uptake of medical insurance, as well as national government initiatives to support and promote the growth of the industry. The accessibility of healthcare services is evidenced by the number of medical beds per 1,000 population, as well as the number of healthcare professionals per 10,000 population: Number of Medical Beds per 1,000 Population The world average for medical beds is 3.0 beds per 1,000 population. In general, the developed country average is higher than the developing country average for the number of medical beds per 1,000 population. In 2013, the developed country average for medical beds per 1,000 population was 5.6 beds while the developing country average for medical beds per 1,000 population was 2.2 beds. Most of the developed and mature countries such as Japan, Republ ic of Korea (“Korea”) and Germany have over 3.0 beds per 1,000 population, with 13.7, 10.3 and 8.2 beds per 1,000 population respectively. In comparison, developing countries like Brunei, Vietnam, Malaysia, the Philippines, Bangladesh, Kuwait, Saudi Arabia, Botswana, Kenya, United Arab Emirates (UUAE”) and Mozambique have 2.8, 2.0, 1.9, 1.0, 0.6, 2.2, 2.1, 1.8, 1.4, 1.1 and 0.7 beds per 1,000 population respectively, which is a lower ratio than the world average for medical beds. 5 Exchange rate from USD to RM in 2004 was converted based on average annual exchange rates in 2004 extracted from published information from Bank Negara Malaysia at USD1=RM3.800 6 Exchange rate from USD to RM in 2013 was converted based on average annual exchange rates in 2013 extracted from published information from Bank Negara Malaysia at USD1=RM3.1511 6
Developed countries generally have more established and mature healthcare systems, with higher medical beds per capita reflecting greater accessibility to healthcare services as well as higher overall expenditure on healthcare development. A lower ratio of beds per 1,000 population, typically prevalent in developing countries, is indicative of latent demand for additional medical beds, thus reflecting the growth potential for healthcare infrastructure in these countries. Latent demand for medical beds refers to the potential growth in demand, as indicated by the relatively lower number of medical beds per 1,000 population as compared to world average or global benchmark standards. The following chart shows the number of medical beds per 1,000 population data of selected developing countries in Asia, Middle East and Africa, as compared with the world average, developing country average and developed country average in 2013, or latest available year. Medical beds per 1,000 population (Selected countries, Global), 2013 (or latest available year) * 16 13.7 14  12  10  8  6 38 4 . 3.611 28:-­-­–I­ ” . –I­ 1.9 –I–­ ; , ‘ ‘.0;’ ;–:~-I—I-­ ,Developing <“‘”‘”,”~,.~c, -I–I–~–~r

” DEVELOPING MIDDLE EAST & ” 10.3 8.2 Developed country _____ .fl!:fti’f!.fle;. §.§­2.9 2.9 aVI~~;~~ 3.0II I DEVELOPING ASIA ” AFRICA ,,’ DEVELOPED COUNTRIES Notes: 1. Developed country average is based on World Bank’s average for high income countries which includes countries such as Australia, Germany, Japan, Iceland, Italy, Norway, Korea, Spain, Singapore, United Kingdom and the United States.
2. Developing country average is based on World Bank’s average for middle income countries which mainly includes countries that are located in Asia, Middle East and Africa, such as Bangladesh, Botswana, People’s Republic of China (“China’), Kenya, Malaysia, Maldives, Mauritius, the Phillipines and Vietnam.

* SMITH ZANDER has collated and selected the data points in the chart above from reports published by World Bank and MOH Malaysia, as well as segregated these data points according to the respective regions, in order to present the data points in an illustrative and informative manner. Source: World Bank, MOH Malaysia, *SMITH ZANDER analysis Number of Healthcare Professionals per 10,000 Population Healthcare professionals are specialists and general physicians, supported by medical assistants, nurses, midwives and allied health workers. Similar to medical bed ratio statistics, developed countries have more established and mature healthcare systems, translating to a higher number of healthcare professionals per 10,000 population. This is also evidence of greater accessibility to healthcare services as well as higher overall expenditure on the development and provision of healthcare services. 7

Developing countries tend to have a lower number of physicians per 10,000 population, and nurses and midwives per 10,000 population when compared with developed countries. The developing country average for the number of physicians per 10,000 population and number of nurses and midwives per 10,000 population was 8.1 and 21.4 respectively in 2013, which is relatively lower than the developed country average for the number of physicians per 10,000 population and number of nurses and midwives per 10,000 population at 28.7 and 88.2 respectively in the same year. Overall, the world average for the number of physicians per 10,000 population and number of nurses and midwives per 10,000 population was 15.5 and 32.8 respectively in 2013. Developed countries such as Germany, United Kingdom, the United States, Japan, Korea and Singapore have a higher number of physicians per 10,000 population of 38.9, 28.1, 24.5, 23.0, 21.4 and 19.5 respectively, as compared to the world average of 15.5 physicians per 10,000 population. Meanwhile, the number of physicians per 10,000 population in developing countries such as Brunei, Malaysia, Vietnam, the Philippines, Sri Lanka, Bangladesh, Botswana, Kenya and Mozambique are generally lower than the world average of 15.5, with 14.4,12.0,11.9,11.5,6.8,3.6,3.4,2.0 and 0.4 respectively. The following chart shows the number of physicians per 10,000 population of selected countries in Asia, Middle East and Africa and selected developed countries, as compared with the world average, developing country average, developed country average in 2013, or latest available year. Physicians per 10,000 population (Selected countries, Global), 2013 (or latest available year) 45 : 38.9 40 , Developedl: 0 ;country,35~ ; average: i:; ,a. . 28.1 28.70 30 j 27.0 ,­———————–1, a. 0 : 25.3 24.9 24.5 ,,0 25 .0 23.0 21.4 i;ci ,19.4~ 19.5 iWorld; 20 a. 1.A’ average: III -I1–l4..<L———–‘.–III–IIf-__——-r,-III–__-.-..-II_-111—-1 15.5 l: 15
12.0 11.9 11.5 :coDeveloping country ‘u .~ 10 _____ C!,:-e!a.g!:~L ‘ -.J:: Q. 3.4•• 5 —1-llt-j–iT 2.00.4 ‘ ;0 ” DEVELOPING MIDDLE ” DEVELOPING ASIA “, EAST AND AFRICA / DEVELOPED COUNTRIES Notes: 1. Developed country average is based on World Bank’s average for high jncome countries which includes countries such as Australia, Germany, Japan, Iceland, Italy, Norway, Korea, Spain, Singapore, United Kingdom and the United States.
2. Developing country average is based on World Bank’s average for middle income countries which mainly includes countries that are located in Asia, Middle East and Africa such as Bangladesh, Botswana, China, Kenya, Malaysia, Maldives, Mauritius, the Phillipines and Vietnam.

* SMITH ZANDER has collated and selected the data points in the chart above from reports published by World Bank and MOH Malaysia, as well as segregated these data points according to the respective regions, in order to present the data points in an illustrative and informative manner. Source: World Health Organisation, World Bank, *SMITH ZANDER analysis 8
Similarly, developed countries such as Germany, Japan, the United States, United Kingdom, Singapore and Korea have a higher number of nurses and midwives per 10,000 population of 114.9, 114.9, 98.2, 88.0, 57.6 and 50.1 respectively, as compared to the world average of 32.8 nurses and midwives per 10,000 population. The number of nurses and midwives per 10,000 population in developing countries such as China, Sri Lanka, Vietnam, Bangladesh, Botswana, UAE, Kenya and Mozambique are generally lower than the world average of 32.8, with 18.5, 16.4, 12.4, 2.2, 28.4, 31.6, 8.6 and 4.1 respectively. Malaysia’s number of nurses and midwives per 10,000 population of 32.8 meets the world average ratio. The following chart shows the number of registered nurses and midwives per 10,000 population of selected countries in Asia, Middle East and Africa and selected developed countries, as compared with the world average, developing country average and developed country average in 2013, or latest available year. Registered nurses and midwives per 10,000 population (Selected countries, Global), 2013 (or latest available year) * 140 I , I I : 114.9114.9 120 Developed,I98,2 country 100 average:, __8_8:0 ~I!:~ 805 I 80 I60.0 576 60 501:487 455, Developing 40 20 o
DEVELOPING ASIA /’ DEVELOPING MIDDLE / DEVELOPED COUNTRIES // EAST AND AFRICA ” Notes: 1. Developed country average is based on World Bank’s average for high income countries which includes countries such as Australia, Germany, Japan, Iceland, Italy, Norway, Republic of Korea, Spain, Singapore, United Kingdom and the United States.
2. Developing country average is based on World Bank’s average for middle income countries which mainly includes countries that are located in Asia, Middle East and Africa such as Bangladesh, Botswana, China, Kenya, Malaysia, Maldives, Mauritius, the Phillipines and Vietnam.

* SMITH ZANDER has collated and selected the data points in the chart above from reports published by World Bank and MOH Malaysia, as well as segregated these data points according to the respective regions, in order to present the data points in an illustrative and informative manner. Source: World Health Organisation, World Bank, *SMITH ZANDER analysis
SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d) The Healthcare Services Industry in Malaysia Malaysia is a newly industrialised country with a growing economy and increasing wealth. The country is supported by a large productive population (aged 15-64 years) and a high employed population, which contributes to the increasing wealth of the population and a growing middle income group. Its Gross Domestic Product (“GDP”) per capita is Socioeconomic indicators (Malaysia), 2008 and 2015 higher than in most Southeast Asian
; , ”__,, ,,_____ _””” : ‘” —-,-1,-“,, , •,~ ·-15-6·:ryears(OJc;r—-·-·—-·’—–66~6-·—·–·-·69~1–‘-‘-‘ ·····6S-years-andaboveT>;;r—–T——-.4:s————5.9-‘-‘—Crude·sTrthRateT —–·-· ——-_._—.-_… _ …… ( I )per 1,000 peop e-Infaniji/fortalityRateT ······ · (per 1,000 births) .·Crude·MortalltYRate·f -• (per 1,000 population)····Ilfe···EX·pectancy=”Female:’ ( )· Years ‘Ilfe-····Expectancy···:···Maie-­• (Years) •TotafEmployed(miIllon) 2’  4.6 6.4 10.7 17.9 76.4 71.6  · Household  Income:  • Distribution 2:  ‘Rrlif2’,999andbeIow”-‘  24.3%  ——————————­RM3,000-RM7,999  54.1%  RM8,000 and above  21.6%
16.3 6.5 4.7 77.4 72.5 13.5 1 The only publicly available data is as at 2013. 2 The only publicly available data is as at 2014. Source: Department of Statistics Malaysia countries with the exception of Singapore and Brunei. Malaysia has a smaller population as compared to other Southeast Asian countries but is nonetheless growing. However, according to the Department of Statistics Malaysia, individuals age 65 years and above comprise around 5.9% of the total population, which is an increase from 4.8% in 2008. Meanwhile, the percentage of individuals that are younger than 14 years old in the country has decreased from 28.7% in 2008 to 25.0% in 2015. Life expectancies for males and females have also increased from 71.6 and 76.4 years respectively in 2008 to 72.5 and
77.4 years respectively in 2015. The increasing percentage of the older population and the longer life expectancy of the population indicates that Malaysia has a growing ageing population.

With an increasing ageing population and decreasing younger population segment, there is a greater risk of illnesses and diseases such as cardiovascular diseases, cancers and other age-related diseases. The increased cases of illnesses and diseases within the country is expected to lead to a greater demand for healthcare services, thus benefitting the healthcare industry. Furthermore, as the country develops further, its disposable income will further increase, and this would inevitably increase the purchasing power of Malaysians, including the demand for healthcare services. According to the MOH Malaysia, total healthcare expenditure in Malaysia, comprising public and private healthcare expenditure, steadily increased from RM17.8 billion in 2004 to RM41.0 billion in 2013, at a CAGR of 9.7%. SMITH ZANDER projects that the total healthcare expenditure in Malaysia will reach RM59.0 billion by 2017, and will grow at a CAGR of 9.5%. The public healthcare system is highly subsidised and public healthcare expenditure consists of Government spending on healthcare operational costs, capacity building and the procurement of pharmaceuticals and medical supplies. The funds originate from tax collections and other government income, and are mainly channelled to the MOH Malaysia through annual budgetary allocations.
Private healthcare expenditure comprises out-of-pocket expenditure incurred by individuals or corporates for healthcare bills, including expenditure covered by private or corporate health insurance plans, purchase of pharmaceuticals and disbursements made by private insurers for medical expenses. Private healthcare expenditure indicates spending incurred in both public and private healthcare facilities, as well as spending on over-the-counter medication/pharmaceuticals, In 2013, public healthcare expenditure was estimated to comprise 52.0% of total healthcare expenditure, while private healthcare expenditure comprised the remaining 48.0% of total healthcare expenditure in that year. Healthcare expenditure (Malaysia), 2004-2017(f)
Breakdown of public and private healthcare expenditure (Malaysia), 2013 , —,-,–,~-~——-­
Notes: 1. Latest available information for total healthcare expenditure is in 2013. i 2. Latest available information for the breakdown of pUblic and private healthcare expenditure is in 2013. * CAGRs and forecasts were computed by SMITH ZANDER. , ; Source: MOH Malaysia, World Bank, *SMITH ZANDER analysis _!—-~—-,-,-,——-~

Public hospitals are Government-owned hospitals operating under public funding by the MOH Malaysia. Many of the major private hospitals are part of networks of hospitals operated by several major private healthcare groups such as IHH Healthcare Berhad, KPJ Healthcare Berhad, Sime Darby Healthcare Sdn Bhd and Columbia Asia Sdn Bhd. In 2014, there were 334 hospitals in Malaysia, comprising 184 private hospitals and 150 public hospitals. Public hospitals saw an increase from 143 hospitals in 2008 to 150 hospitals in 2014, while private hospitals declined from 209 hospitals in 2008 to 184 hospitals in 2014. The decline in number of hospitals in 2014 is attributed to the difference in tabulation of number of private hospitals by the MOH, where in 2013 all private hospitals that were licensed or in operations were included; but in 2014 only private hospitals licensed (or had their licenses renewed) as at 31 December 2014 were included. Hence, the method of tabulating the number of private hospitals differed in 2013 and 2014. Notwithstanding the reason above, there may also have been closures of smaller private hospitals in 2014 as a result of rising costs of operations. Number of public and private hospitals (Malaysia), 2008-2014 I• ……. 147 ..

:~~~IJC~~~Plt~l~ -~1144 \ 145 146, 143 …….. 14~ J 1.~.~ j
I Private Hospitals ·········209 I'” 209′ 220 209 214 I 184 tf 6tai~Ho~piais~ C~T~ u:””m~B,~~”p~mr”m366 m ••

3a<C’! I.~:.m ..~·’.” m ••••~ ~m m . Note: * Total number ofhospitals were computed by SMITH ZANDER. Source: MOH Malaysia, *SMITH ZANDER analysis Thus, this decline in hospitals in 2014 appears to be due to factors other :than demand for healthcare services, as demand for healthcare services has demonstrated an increase, as evidenced by the rise in hospital admissions in Malaysia from 3,323,000 in 2013 to 3,696,800 in 2014, a growth of 11.2%. Between 2010 and 2014, the number of hospital admissions grew by a CAGR of 4.2%, from approximately 3.1 million patients in 2010 to 3.7 million patients in 2014. Meanwhile, outpatient attendees grew from 49.9 million persons in 2010 to 61.8 million persons in 2014, at a CAGR of 5.5%. Hospital admissions and outpatient attendees in public and private hospitals and medical centres (Malaysia),2010-2014 . Hospital admissions (‘000) : Outpatient attendees (‘000)Note· o••••••••~•••• ~.~.. ~,.””” * CAGRs were computed by SMITH ZANDER. Source MOH Malaysia, *SMITH ZANDER analysis
Moving forward, the number of hospitals in Malaysia is expected to increase, as witnessed by new and upcoming developments such as the KPJ Bandar Dato’ Onn Specialist Hospital, Iskandariah Hospital and a public hospital in Pasir Gudang which are to be developed in Iskandar, Johor; public hospital in Pendang, Kedah; KPJ Perfis Specialist Hospital and Padang Besar Hospital which are to be developed in Perlis; Seri Iskandar Hospital and a private medical education facility in Meru, Perak; public hospitals in Dungun and Kemaman, Terengganu; KPJ Pahang Specialist Hospital and a public hospital in Maran in Pahang; UCSI University Hospital in Bandar Springhill in Negeri Sembilan; as well as University of Malaya Health Metropolis (“UMHM”) and a public hospital in Cyberjaya in Selangor. Selected upcoming hospitals (Malaysia), 2015 onwards
I (a project of TMC Life Sciences Berhad) -~-.—.–l~——-.-.~-­! Public hospital in Pasir Gudang [ Public Kedah IPublic hospital in Pendang 1 -Publi-;;–­ I,l l _._.__  [ Padang Besar Hospital Public Perl is i KPJ Perlis Specialist Hospital i·, ( . f K J d) ‘Privatei a project 0 P Healthcare Berha i ——.-..–rS~~il~kandar Hospital ·-·—··-·—–··-r-..–·-·-·P~b·I~·–···­
Perak I Medical education facility Private ~ ….. ……… .J(C3P~()jE?c:;~()fqIQr()LJP) 1…………… ……………………………………………………….j
! Public hospital in Dungun Public ierengganuI I PUblic hospital in Kemaman i Public I ,__. .__ __.__.__.__.._: .__._ _ .._ _. ._ _ .._ __ + .._ _ ..__._ _._._ -. -I . ! KPJ Pahang Specialist Hospital (a project of KPJ I Private I Pahang ! Healt~care Berh,92>..__.. .._ _ _ _ _ _ ,l_ _. __. . ._.[ 1-….–….–l!’~.~~~ ..~~~~~~~~-~~~~.~ ————…..—-..1–.—Public _…. 1 I Negeri Sembilan ! UCSI University Hospital I Private I i—-·—·–·—t——-~–.-..-.-..-.-.-.—….—…!-..—-.—-..-.-“–1 UMHM Public I Selangor ~,__. _~~~_—”—P_ub_l_ic_h_o_s:….pi_ta_1in Cyberja~~_ ….. i Pu~l_ic _’ Source’ SMITH ZANDER Key Demand Drivers Increasing incidences of chronic diseases leading to greater demand for healthcare services There is increasing incidences of chronic diseases mainly attributable to more stressful lifestyles, consumption of processed foods which generally have higher saturated fat content and lower nutritional values, and a more sedentary lifestyle with lack of regular exercise. As a result, there has been an increase in chronic diseases such as ischaemic heart diseases, hypertensive diseases, asthma, and cancer. In Malaysia, the number of discharge rates for patients with chronic diseases, or non-communicable diseases, such as heart diseases, stroke and cancer increased from approximately 69,599 patients in 2003 to 142,184 patients in 2014. Mortality rates of patients suffering from malignant neoplasm (cancer) in Government hospitals, also grew from 6.07 per 100,000 population in 2003 to 18.15 per 100,000 population in 2014. Furthermore, the increase in the intake of high calorie, processed foods and fast foods, and a sedentary lifestyle has led the nation, adult and children alike, to be overweight. The fourth National Health and Morbidity Survey conducted in 2011 (“NHMS 2011”) estimated the prevalence of obesity at 27.2% (4.4 million) for adults above 18 years old and 3.9% (0.3 million) for children below 18 years old. This survey raises much concern because the number of overweight adults had grown by almost seven (7) fold in the past 15 years, from 4.0% in 1996 to 14.0% in 2006 and to 27.2% in 2011. Furthermore, the NHMS 2011 13
also reported a further 33.3% of adults were on the verge of becoming overweight. The increase in obesity is alarming as it is an indicator of future increases in incidences of chronic diseases, such as hypertension, diabetes and cancer. This can be seen from the increase in prevalence of diabetes, as reported by the National Diabetes Registry, from 6.3% for adults over the age of 30 in 1986, to 15.2% amongst adults above 18 years old in 2011.7 The consequences of obesity and chronic diseases ranges from an adverse impact on the quality of life to an increased risk of premature death, consequently resulting in higher healthcare expenditure and a greater demand for healthcare services. An ageing society in Malaysia is expected to drive the demand for healthcare The demographic in Malaysia is shifting, as depicted by the decreasing younger population and increasing older population over the years. Malaysia’s percentage of population below 14 years of age in the country has decreased from 28.7% of the total population in 2008 to 25.0% of the total population in 2015, while the percentage of population above 65 years old of age has increased from 4.8% of the total population in 2008 to 5.9% of the total population in 2015. It is estimated that the number of older population will increase to 3.4 million in the year 2020 (representing 9.9% of the total population). An ageing population is defined as a shift in the distribution of a country’s population towards an older age group, which is mainly caused by the ageing of baby boomers8, who are moving into retirement age. This is further exacerbated by low birth rates, low mortality rates and improved life expectancy. A low birth rate is mainly the result of increasing urbanisation which is associated with increased living costs and a busy lifestyle, both of which are less conducive to family building. A low mortality rate and improved life expectancy are primarily the result of better living conditions from increased wealth, access to better nutrition, healthcare and sanitation, as well as overall economic and political stability in countries. An ageing population is expected to lead to an increase in the demand for healthcare services due to: • higher occurrence of chronic diseases such as cardiovascular diseases as well as cancer and age­related diseases such as arthritis and diabetes;
• higher requirement for diagnosis and hospital-based inpatient and outpatient treatment; and
• longer duration of care.

The increasing demand for healthcare services will ultimately drive the growth of the healthcare services industry. [The rest of this page is intentionally left blank] 7 Latest available data is as at 2011 8The baby boomers refer to those born during the 1940s -1960s 14
Increased accessibility to healthcare services due to growth in income and/or uptake of medical insurance continues to drive the healthcare services industry Over the years, medical insurance have increasingly become more attainable to individuals in Malaysia. This is illustrated through the rise in medical and personal accident insurance premiums, from RM1.3 billion in 2008 to RM2.0 billion in 2015, at a CAGR of 6.3%, indicating that the increasing affluence and rising income of the population has led to greater uptake in medical insurance plans. This increase in the uptake of medical insurance has resulted in a greater affordability in attaining  healthcare  services,  particularly  from  the  private  healthcare  sector.  Thus,  as
affordability increases, this will drive the healthcare services industry. Malaysia is an upper-middle income developing economy with aspirations to achieve developed status by the Net premiums for medical expenses and personal accident insurance (Malaysia), 2008·2015 2.5
Note: * CAGRs were computed by SMITH ZANDER. Source: Bank Negara Malaysia, *SMITH ZANDER analysis year 2020. GOP per capita grew at a CAGR of 6.3% from approximately RM19,651 in 2004 to RM36, 165 in 2014, while purchasing power parity (“PPP”) per capita income increased at a CAGR of 5.2% during the same period, from approximately US015,106 (RM57,4039) in 2004 to US025,145 (RM82,31510) in 2014. This increase in GOP and PPP per capita is evidence of a rise in a more affluent population that has greater spending power, creating demand for basic necessities and non-essential products, including healthcare services. [The rest of this page is intentionally left blank] 9 Exchange rate from USD to RM in 2004 was converted based on average annual exchange rates in 2004 extracted from published information from Bank Negara Malaysia at USD1=RM3.800 10 Exchange rate from USD to RM in 2014 was converted based on average annual exchange rates in 2014 extracted from published information from Bank Negara Malaysia at USD1=RM3.2736 15
Growth in disposable income (Malaysia), 2004-2014
80,000 30,000 ·tay6.3%70,000 op per cap! . 5 2% C CAGR (Gpp per capitay. . 25,000 rn =>~ CAGR (p –Q)60,000:E 18582 19,502 19,021 E 0a:::,17,198 ‘•….. #-·~w·,,-··_<lIP-· 20,000 (,J –III 50,000 l::!:: C. IIIIII 34 020 36,1651(,J 40,000 15,000 … 31 372 32,904, : -‘iii. IIIQ) . 28,811 2621728,733 ‘ , (,Jc. 30,000 : 22 971 25,356 , … 0.. Q) C [19,651 21,203 ‘ 10,000 C. C> ., 0..20,000 0.. 5,000 0.. 10,000 o 0 R)~ R)~ R)<O R)’\ R)’O R)<?> R>”<::> <::>,,” <::>,,”t-<::>”~”t-\:5 “t-\:5 “t-\:5 “t-\:5 “t-\:5 “t-\:5 ‘l) ‘l) ‘l) ‘l) -GDP per capita –+–PPP per capita Source: International Monetary Fund Government initiatives to promote the healthcare services industry The Government of Malaysia has launched various national plans and programmes to support the growth of the healthcare services industry. The national initiatives implemented by the Government support various segments of the healthcare industry, from the provision of medicines to the construction of healthcare facilities. Among these plans and programmes include: a) National Strategic Plan for Non-Communicable Diseases (or Chronic Diseases) The MOH Malaysia released a “National Strategic Plan for Non-Communicable Diseases” (“NSP­NCD”) to address the increasing prevalence of these diseases more efficiently and effectively. The strategies of the NSP-NCD include, amongst others, preventing chronic diseases, equipping healthcare professionals with appropriate knowledge, and equipping healthcare facilities with minimum clinical equipment and tools required to diagnose and treat these diseases. This plan will increase the population’s awareness of non-communicable diseases or chronic diseases, boosting the overall healthcare services industry. b) Economic Transformation Programme (“ETP”) The healthcare sector of the ETP, driven by the Performance Management Delivery Unit (“PEMANDU”), aims to further grow the overall healthcare sector, with a broad coverage on areas such as medical devices, aged-care services and clinical research. Collectively, the 17 Entry Point Projects (“EPPs”) under the ETP are projected to create 26,966 jobs and generate an income of RM6.59 billion by 2020.
Specific to the healthcare sector, EPPs that further boost the demand for healthcare are as listed below:
EPP 4: Reinvigorating Increase in patient volume through marketing and cross­4,294.4 healthcare travel border alliances, offering better patient care and experience, upgrading of infrastructure and increasing the number of healthcare specialists. The establishment of medical healthcare travel has allowed for increased foreign patients, as depicted by the increase in revenue of RM683.92 million generated from medical healthcare travel in 2013.
EPP 6: Developing a UMHM-willcomprisea320-bed hospitai,a ·338~ 986.2 health metropolis healthcare hotel, a medical research centre and other. supporting healthcare facilities. UMHM will be the launching pad of a larger series of healthcare ecosystem in various locations in Malaysia. UMHM is expected to be operational by 2017.
·····211.9 healthcare services EPP through its “Kasih Atas Sumbangan Ikhlas dan Hemat” project. This project enables senior citizens in Malaysia to have accessibility to nursing and rehabilitation services through mobile healthcare services.
EPP 15: Mobile ··Love On Wheels Healthcare Services Sdn Bhdleadsthis .. EPP 16: Institutional··· Econ .Heaithcare Group will build the first retirement 83.0 aged care village complete with nursing home facilities in Cheras. The retirement village will comprise a 200-bed nursing home and other nursing home facilities, to cater for the elderly who require medical assistance. EPP 17: Retirement Eder1-0r1-The~ParkSdn Bhd is building ··the . first 1,194.0 villages Integrated Senior Active Lifestyle and Care Residence Resort in Kuching, Sarawak. It will be the prototype of future retirement villages in Malaysia when it is completed in 2016.
Source: PEMANDU [The rest of this page is intentionally left blank]
In addition to the ETP national plans and programmes, the Government of Malaysia also announced several measures to drive the growth in the healthcare services industry under the 2015 Budget and the 2016 Budget. The measures are:
Developing healthcare The construction of two (2) hospitals, 20 health clinics and four (4) dental clinics to facilities increase the number of Government healthcare facilities. . Estabiishing 1Maiaysia CiinicsThere arepians toestablish30·additiollal1lv1alaYsia c1illicS in Budget 2015. Under . Budget 2016, RM52 billion has been allocated to cover the operations of existing· 1Malaysia clinics and to establish an additional 33 1Malaysia clinics.This will increase the total number of Government healthcare facilities and healthcare support staff. . Repladng haemodialysis … Healthcareservices in Governmenihospitals and c1inics\Nillbeimproved,leading machines in Government to patients haVing greater access to better care. hospitals and clinics Providing medication forPaiientsWili have increased access to medicationforhaemodialysis. patients undergoing haemodialysis treatment
Providing tax relief for chronicPatlellts OfchronicdiseasesWiil be entitled to a tax relie(o(up toRlv16,OOOfor diseases expenses. This tax relief is opened to the tax payer, spouse and children. . Providing ··complimentaryThe55,O()()dengue testkiis distributed free Of charge to private clinicS is expected dengue test kits to contain the dengue fever epidemic as it would expedite the detection of dengue fever. Construction and~ The construction of five (5) new hospitals in Pasir Gudang, Kemaman, redevelopment of healthcare Pendang, Maran and Cyberjaya. facilities • The redevelopment of Kajang Hospital.
The construction and upgrading works of various rural clinics, health clinics and dental clinics located nationwide. Supply of medic8l goods .. The GClverllmellthas· allocated Rlv14.6biliion for the supply of medicilles, consumables, vaccines and reagents to all Government hospitals and clinics. Medical charges on non­Beginning 1 January 2616, the Governmentwill impose full medical charges Cln . citizens non-citizens. Source: Ministry of Finance Malaysia Furthermore, Khazanah National Berhad, the strategic investment fund of the Government of Malaysia, also announced in September 2015 that IHH Healthcare Berhad had committed to a capital expenditure of RM670 million for the expansion of existing hospitals and construction of new hospitals in Medini Iskandar, Johor; Kuala Lumpur, Wilayah Persekutuan; Klang, Selangor; Malacca; and Kota Kinabalu, Sabah. Khazanah National Berhad also announced its intention to invest approximately RM100 million in an in­patient rehabilitation hospital business over the next two (2) years. The in-patient rehabilitation hospital business will be a collaboration between Khazanah National Berhad and a foreign technical operator and equity partner.
4 MEDICAL BED, PERIPHERAL AND ACCESSORY INDUSTRY IN MALAYSIA Definitions and Segmentation Medical beds, peripherals and accessories are essential supplies to hospitals and medical centres as patients require the usage of medical beds, peripherals and/or accessories during the time they are hospitalised and/or are attended to. The medical bed, peripheral and accessory industry can be broadly segmented into the following: (i) Medical beds Medical beds refer to beds specially designed for hospitalised patients or individuals in need of any form of healthcare services. Medical beds have different features from ordinary beds (such as adjustable height, backrest, kneerest and footrest, and mobility) for the purpose of providing comfort and for the well-being of the patient, as well as for the convenience of healthcare professionals (i.e. doctors and nurses) during the provision of healthcare services. Medical beds are a measure of capacity for hospitals and medical centres as medical beds determine the number of patients any particular hospital or medical centres can support. There are various types of medical beds, generally categorised into manual beds, hydraulic beds, electric beds and delivery beds. Manual beds are beds where adjustment for height, backrest, kneerest and footrest are operated manually. Meanwhile, height, backrest, kneerest and footrest adjustments are controlled using a hydraulic mechanism for hydraulic beds, and an electrical system for electric beds. Manual beds are commonly used in developing countries due to the substantial difference in pricing between manual beds, and hydraulic and electric beds. Furthermore, developing countries with less established energy infrastructure are also more inclined towards the use of manual beds due to frequent power outages and/or fluctuations in electrical current. Hydraulic and electric beds are more prevalent in developed countries as well as in private hospitals and medical centres in developing countries. Delivery beds, on the other hand, are specially-designed beds to provide support for mothers during labour, delivery and/or after-delivery stages. (ii) Medical peripherals and accessories Medical peripherals and accessories include products such as patient transport trolleys, examination tables, medical carts and instrument trolleys. These products are not typically used as a measure of capacity to determine the number of patients a facility can support. Instead, they are nonetheless important items used in the course of the daily operations of a hospital or medical centre. Patient transport trolleys are used to transport patients within and out of the hospital, and are typically narrower than medical beds to allow for easier mobility. Examination tables are flat based medical beds which patients are placed upon during a medical examination. On the other hand, medical carts are typically used by healthcare professionals to temporarily or permanently hold and/or store medical equipment, instruments and accessories, while instrument trolleys are designed for healthcare professionals to hold medical instruments during the time they are examining or performing an operation on a patient.
Segmentation of the medical bed, peripheral and accessory industry, 2015
Note: This list is not exhaustive.
Source: Slv1!TH ZAl\JDER [The rest of this page is intentionally left blank]
Key Demand Drivers Growth in demand for healthcare services is expected to drive the medical bed, peripheral and accessory industry The demand for healthcare services has been increasing over the years due to the changes in lifestyle, leading to higher incidences of chronic diseases, the demographic shift to an ageing population, the increased accessibility or uptake of medical insurance, as well as Government initiatives in driving the healthcare services industry. The increasing demand for healthcare services has consequently led to a growth in healthcare facilities, thereby increasing demand for additional medical beds, peripherals and accessories, in order to furnish and equip new healthcare facilities. (Please refer to Chapter 3· The Healthcare Services Industry of this IMR report for further details on the increase in demand for healthcare services.) Government initiatives to promote the medical bed, peripheral and accessory industry The Government plays an active role in driving the healthcare equipment sector, thus benefiting the medical bed, peripheral and accessory industry. The MOH Malaysia acknowledges the shortage of medical beds in the country, and has announced that the Government has been taking measures to improve access to healthcare in general, including the upgrading of existing hospitals and the building of new hospitals in high density areas to accommodate for the lack of healthcare services and insufficient number of beds. In the 11 th Malaysia Plan which was launched in May 2015, the Government announced its aim to achieve universal access to quality healthcare, and in doing so it aims to increase the medical bed ratio to 2.3 beds per 1,000 population. The ETP (2011-2020) was launched in 2010 with the goal of promoting Malaysia into an inclusive and sustainable high-income country by the year 2020. The ETP is a comprehensive initiative comprising 131 high impact projects under 12 economic focus areas that have the potential to stimulate economic growth. The healthcare sector is a key driver of domestic consumption and plays a significant role in promoting economic growth. Among some of the initiatives highlighted under the ETP, which will boost the growth of the medical bed, peripheral and accessory industry, are as listed below: (i) EPP 11: Orchestration of a Medical Equipment Supply Chain
UWC Holdings Sdn Bhd have been identified and selected to lead this initiative through the construction of an 80,000 square feet medical equipment manufacturing facility in Penang. The facility will manufacture medical beds, peripherals, accessories and equipment such as medical beds, trolleys, stretchers, immobilisers and pre-filled humidifiers. This project is estimated to bring in RM1.0 billion in GNI by 2020.
(ii) EPP 13: Building a Medical Hardware and Furniture Cluster LKL Advance Metaltech Sdn Bhd, a subsidiary of LKL International Berhad, was identified to

spearhead this project of developing the medical bed, peripheral and accessory sector. This project is estimated to bring in a total of RM380 million in GNI by 2020. Furthermore, IHH Healthcare Berhad’s commitment to expand its existing hospitals and build several new hospitals in Johor, Kuala Lumpur, Selangor, Malacca, and Sabah, as well as Khazanah National Berhad’s intention to invest in an in-patient rehabilitation hospital business will contribute to higher demand for medical beds, peripherals and accessories.
Market Size and Growth Prospects The medical bed, peripheral and accessory market size in Malaysia is defined as the sum of local industry manufacturers’ revenues, and imports of medical beds, peripherals and accessories, net of exports by local industry players. Thus, it denotes consumption of medical beds, peripherals and accessories in the country. The local industry players include both manufacturers, and agents and distributors. Manufacturers are companies which are involved in the manufacturing of their in-house house brand of medical beds, peripherals and accessories and/or contract manufacturing of these products, while agents and distributors are companies which market and distribute local as well as imported medical bed, peripheral and accessory brands. (Please refer to Chapter 4-Medical Bed, Peripheral and Accessory Industry (Competitive Overview) of this IMR report for further details on these industry players.) The market size for medical beds, peripherals and accessories has demonstrated positive growth, increasing from approximately RM40.2 million in 2008 to approximately RM77.6 million in 2014, at a CAGR of 11.6%. The market size in 2014 is the latest available data as the financial year end (“FYE”) 2014 is the latest year where financial information of the identified local manufacturers are available. Moving forward, SMITH ZANDER forecasts the medical bed, peripheral and accessory market size to grow from an estimated RM86.3 million in 2015 to RM118.9 million in 2018, at a CAGR of 11.3%. This is expected to be driven by the growing healthcare services industry and Government-driven initiatives to promote the medical bed, peripheral and accessory industry. (Please refer to Chapter 4-Medical Bed, Peripheral and Accessory Industry (Key Demand Drivers) of this IMR report for further details on key demand drivers). Medical bed, peripheral and accessory market size (Malaysia), 2008-2018(f) *
Note: * CAGRs and forecasts were computed by SMITH ZANDER. The market size for medical beds, peripherals and accessories was also computed by SMITH ZANDER based on revenues oflocal manufacturers’ and imports ofmedical beds, peripherals and accessories, net ofexports by local industry players. Source: Suruhanjaya Syarikat Malaysia (“SSM’), United Nations Comtrade Database, *SMITH ZANDER analysis
In 2014, there were 57,571 medical beds available in hospitals and medical centres in Malaysia, of which 43,822 medical beds were in public hospitals and medical centres, while 13,749 medical beds were in private hospitals and medical centres. Over the last six (6) years, medical beds grew by a CAGR of 1.3%, growing from 53,414 medical beds in 2008 to 57,571 medical beds in 2014. Much of this growth was driven by medical beds in private hospitals and medical centres, as depicted by the relatively higher CAGR during this period of 2.1 % as compared to the CAGR of medical beds in public hospitals and medical centres of 1.0%. The growth in the number of medical beds in private hospitals and medical centres were mostly attributed to the growth from hospitals, nursing homes and hospices. Nevertheless, it should be noted that the number of medical beds in public hospitals and medical centres are substantially higher than the number of medical beds in private hospitals and medical centres in Malaysia, with public hospitals and medical centres holding about three (3) quarters of the total number of medical beds in Malaysia. Number of medical beds in public and private hospitals and medical centres (Malaysia), 2008-2014
Hospices 28 ,28 30 38 38′ ,._._. .__. ..__ -._.. -_. ._~._~_”_ .~_ -.__.__,_ ~ . . -. . i————–.;–. .._ ; .. _ : Ambulatory care centres NA 108 125, 125 101:i’Comm-unitymenti3r——;—-~~ —-t—-;~ –~—~ -~—-,—-~—-+ . . . ..L._–“1–0—‘-‘–‘-“–.-. l_~_EJ9Itll_~Cl~EJ_c;E:l’:l,t.r_E:l~ ,.,.,.__’… _~, .. ,______________ ~.._ …_, __~__ ~ … __ ~___? …. __ …. ~_~??~~~:” Notes: 1. NA denotes data is not available.
2. A*CAGRs pertain to period between 2009 and 2014.

* CAGRs were computed by SMITH ZANDER. Source: MOH Malaysia, *SMITH ZANDER analysis [The rest of this page is intentionally left blank]
In terms of the annual increase in the number of medical beds, public hospitals and medical centres saw a rise of 233 beds between 2010 and 2011, followed by increases of 991 beds in 2012, 730 beds in 2013 and 385 beds in 2014. Private hospitals and medical centres recorded increases of 571 beds between 2008 and 2009, and 974 beds, 497 beds, 59 beds and 442 beds in 2010, 2011, 2012 and 2013 respectively. In 2014, private hospitals and medical centres recorded a decrease of 959 beds, in line with the dedine in the number of private hospitals and medical centres. The decline in the total number of medical beds in 2014 of 574 beds is in line with the decrease in number of hospitals in Malaysia in the same year. The decline in number of hospitals in 2014 is attributed to the different method of tabulating the number of private hospitals in 2013 and 2014, as highlighted in Chapter 3-The Healthcare Services Industry (The Healthcare Services Industry in Malaysia). Notwithstanding this, there may also have been closures of smaller private hospitals in 2014 as a result of rising costs of operations. Thus, the decline in hospitals appears to be due to factors other than demand for healthcare services, as demand for healthcare services has demonstrated an increase, as evidenced by the rise in hospital admissions in Malaysia from 3,323,000 in 2013 to 3,696,800 in 2014, a growth of 11.2%. Annual increase/decrease in medical beds in public and private hospitals and medical centres (Malaysia), 2009-2014′
Notes. 1,  The annual increase/decrease in beds do not include replacement beds, (Please refer to Chapter 4  -Medical Bed,  Peripheral and Accessory Industry in Malaysia (Market Size and Growth Prospects) (page 26) of this IMR  report for a detailed explanation).  2,  NA denotes data is not available.
* The annual increase/ decrease in medical beds were computed by SMITH ZANDER, based on the total number of medical beds in Malaysia each year. Source: MOH Malaysia, *SMITH ZANDER analysis As stated earlier in this IMR report, Malaysia’s medical bed ratio of 1.9 beds per 1,000 population in 2014 remains below both the developing country average and world average of 2.2 and 3.0 beds respectively. (Please refer to chart illustrating the medical beds per 1,000 in selected countries worldwide in Chapter 3 -Healthcare Services Industry (The Global Healthcare Services Industry) of this IMR report). The latent demand for medical beds in Malaysia is reflected by these statistics. As healthcare expenditure and infrastructure continue to rise in Malaysia, the number of medical beds per 1,000 population in Malaysia 24 will edge closer to the world average, signifying potential for growth in the number of medical beds in the country. Malaysia had 57,571 medical beds available in public and private hospitals and medical centres in 2014.
In order to estimate the potential for growth in the number of medical beds, SMITH ZANDER has assumed the following: Assumption 1: The population in Malaysia is forecast to grow by 9.2% from 30.1 million persons in 2014 to reach 32.9 million persons by 2020.
2014 30,098 2020 32,856 9.2 Source: World Bank, *SMITH ZANDER analysis Assumption 2: Malaysia is expected to achieve a medical bed ratio of 2.3 beds per 1,000 population, in line with the target stated in the 11 th Malaysia Plan. (Please refer to Chapter 4 -Medical Bed, Peripheral and Accessory Industry (Key Demand Drivers) of this IMR report for further details). Assumption 3: The number of medical beds available when Malaysia meets the target stated in the 11 th Malaysia Plan and world average for medical beds per 1,000 population of2.3 and 3.0 beds, respectively, have been calculated based on a population of 32.9 million persons. , According to the 11 th Malaysia Plan, the Government of Malaysia announced its aim to achieve universal access to quality healthcare, and in doing so aims to increase the medical bed ratio to 2.3 beds per 1,000 population. If Malaysia meets this target, Malaysia has the potential to grow its net increase of new medical beds by another 17,998 medical beds to 75,569 medical beds in the future. Over the longer term, should Malaysia continue to grow and if the couritry meets the world average of 3.0 beds per 1,000 population, the estimated net increase of new medical beds in the country is expected to grow by a further 22,999 medical beds to 98,568 medical beds. [The rest of this page is intentionally left blank] Growth potential for medical beds (Malaysia), 2014*
III .~ iij :iiE t: 1Il “C Ql .c iij .~ “C Ql Eo –
… Ql .c E :l Z ,———————-¥—————————-~—————————————————————————————, ‘latent :,·’Latent demand”demand’basedon 3.0 !’, . based on .. medical beds ‘ , 2.3 medical • per 1,000 , beds’per’-‘
, 1000 population p~p~iation
2014 1ph Malaysia Plan target a Medical bed 1.9 2.3 3.0 ratio: ‘
Notes: a The number of medical beds available in Malaysia, should Malaysia have a medical bed ratio of 2.3 beds per 1,000 population as per the 11th Malaysia Plan target. b The number of medical beds available in Malaysia, should Malaysia reach a medical bed ratio equal to the current world average of 3.0 beds per 1,000 population.
Source: World Bank, *SMITH ZANDER analysis It is also important to note that the abovementioned growth in medical beds are net increases, which do not take into account the annual growth of replacement medical beds in public and private hospitals and medical centres in Malaysia. On average, the useful lifespan for medical beds is approximately 10 years, and hospitals and medical centres typically replace a medical bed at the end of its useful lifespan. The presence of replacement medical beds thus signifies that the overall growth in demand for medical beds is realistically higher.
As an illustration, LKL International Berhad’s annual medical bed sales in Malaysia has been consistently higher than the annual increase/decrease of registered medical beds in Malaysia between 2011 and 2014, indicating that the statistics on the annual increase/decrease of registered medical beds in Malaysia does not include the annual number of replacement of medical beds. Even though the total number of medical beds declined in 2014, LKL International Berhad’s annual medical bed sales in Malaysia continued to illustrate growth, as shown below:
: Net annual increase/decrease of medical beds in : public and private hospitals and medical centres in • LKL International Berhad’s annual medical bed sales • volume in Malaysia (units)  730 3,200  1,050 2,201  1,172 4,021  -574 4,431
1. LKL International Berhad’s annual medical bed sales volume refers to the number ofelectric, hydraulic, manual and delivery beds sold during the respective calendar year. * The annual increase/decrease in medical beds were computed by SMITH ZANDER, based on the total number of medical beds in Malaysia each year. Source: LKL International Berhad, MOH Malaysia, *SMITH ZANDER analysis The growth potential for medical bed, peripheral and accessory industry players in Malaysia is not limited to the demand from within the domestic market, as industry players may also tap into the latent demand present in international markets. As illustrated earlier, there is a latent demand for medical beds in most developing countries, particularly in Asia, Middle East and Africa, and this is indicated by the lower developing country average for medical beds per 1,000 population of 2.2 beds relative to the world average of 3.0 beds. With 2.2 medical beds per 1,000 population, developing countries are estimated to collectively have 11.3 million medical beds in 2013. Assuming that the developing countries are able to meet the world average of 3.0 medical beds per 1,000 population in the future, the total number of medical beds in developing cQuntries could reach 15.4 million medical beds, indicating a latent demand of 4.1 million medical beds. This potential increase of 4.1 million medical beds signifies the vast opportunities present in developing countries in Asia, Middle East and Africa. Growth potential for medical beds (Developing countries: Asia, Middle East and Africa) * -,-~~—————————-_._­Latent demand based on 3.0 medical beds per 1,000 populationIII “0 (I) ..0 15.4 ‘i6 to>:.s (I) E~ 11.3 …. 111 ___________ ~ ~~1 o r:::
, [ … 0 [ Note.'(I):: [..0= [ [ * The number of medical beds E:i!: [::::l­[ available in developingr::: I”0 I countries was computed byI ~ I [ SMITH ZANDER based on E [ medical bed ratio andI I~ w I
population data in I : II developing countries. I ~~~’~–‘-‘-~-r~~__l’__~~~~”-~–~~-~~-,,—–,~ World average Source: World Bank, Medical bed ratio’ 2 2 ‘.3.0 *SMITH ZANDER analysis 27 To further illustrate the growth potential for medical beds in Malaysia and other developing countries in Asia, Middle East and Africa, SMITH ZANDER has drawn a correlation between GDP per capita and medical bed ratios of selected countries worldwide.

Based on global trends, the medical beds per 1,000 population is correlated with the economic development of a country. The growth of medical beds and its correlation to economic development can be seen across developed countries that exhibit relatively high GDP per capita, as well as in developing countries with lower GDP per capita. This correlation suggests higher medical bed ratios as countries develop and the per capita income of a country rises. In general, developed countries such as Finland, Germany, Belgium, France and Spain, among others, with GDP per capita in excess of USD25,000, recorded medical bed ratios of 3.0 beds per 1,000 population and above, which is higher than the world average. Likewise, developing countries including countries in Asia such as Bangladesh, Malaysia, Vietnam and India, and countries in Middle East and Africa such as Botswana, Bahrain, Kenya, Ghana and Saudi Arabia with GDP per capita of USD25,000 and below, registered medical bed ratios that was lower than the world average of 3.0 beds per 1,000 population. Thus, this signifies that as Malaysia and other developing countries continue to show economic growth, and drawing from the above correlation, the demand for medical beds, peripherals and accessories would be expected to grow in tandem. Relationship between number of medical beds per 1,000 population and GOP per capita (Selected countries, Global), 2013 (or latest available year) * .,.­.. ‘ .. ‘ • I I Sir:g3PO:0 I I I I I I I

I .,I~2:)­I ~~~;’Iy;:: i ””I'”;>’r­.~r~:~~;·:’:j~, ! I I •• 3:?'”:f2.ln : S;;~:::L 4ra:)!;. !

Note: * SMITH ZANDER has selected and collated the data points (i.e. GOP per capita and number of medical/ healthcare beds per 1,000 population) from World Bank, and plotted the correlation of the data points in the chart above, including computing the dotted correlation line. Source: World Bank, *SMITH ZANDER analysis 28
Product Substitution Medical beds, peripherals and accessories are essential supplies to hospitals and medical centres as patients require the usage of these products during the time they are hospitalised. As such, there is no effective product substitutes to medical beds, peripherals and accessories. Supply Conditions and Dependencies Availability of labour and equipment for the manufacturing of medical beds, peripherals and accessories Medical bed, peripheral and accessory manufacturing requires human labour and in most cases the use of equipment. Equipment utilised in the manufacturing of medical beds, peripherals and accessories include, amongst others, welding machinery, laser-cutting machinery, as well as punching, drilling and bending machinery and equipment. As many industry players typically manufacture more than one (1) type of product in accordance to the needs of their customers, human labour is still required to transfer the materials from one equipment to another, and to assemble the different components and parts to form the final product. Both equipment and labour required in the manufacturing of medical beds, peripherals and accessories are readily available, with equipment available for purchase from local or foreign suppliers and manufacturers, and domestic and foreign workers hired as labour for the manufacturing process. Availability of raw materials and supplies The raw materials and supplies used in the manufacturing of medical beds, peripherals and accessories are primarily steel materials such as steel sheets, tubes and bars. Components and parts such as plastic materials, digital or electronic products (e.g: digital weighing scales, X-ray equipment, and monitoring or inspection censors), as well as castors and wheels are also essential to the manufacturing of medical beds, peripherals and accessories. Most of these raw materials and supplies are generally readily available, and medical bed, peripheral and accessory manufacturers source these raw materials and supplies from local suppliers and as well as foreign distributors or manufacturers. However, medical bed, peripheral and accessory manufacturers must ensure the quality of these raw materials and supplies as the products manufactured must meet the expectations and safety requirements set out by their customers. Reliance and Vulnerability to Imports Total imports of medical beds, peripherals and accessories 11 in Malaysia was estimated to be about USD10.5 million (RM35.0 million12) in 2008 and USD9.6 million (RM31.4 million13) in 2014. While imports constituted more than 87.1% of the medical bed, peripheral and accessory market size in Malaysia in 2008, the percentage of imports has since reduced by almost half of the market, i.e. 40.5%. This demonstrates a decreasing reliance on imports of these products, and illustrates that the domestic market is increasingly becoming more receptive towards domestic players and brands. The higher levels of product quality and after-sales service of locally manufactured products are increasingly shifting the balance towards domestic industry players as customers and end-users (i.e. local public and private hospitals and medical centres) increasingly purchase medical beds, peripherals and accessories from local players. 11 Includes medical, surgical, dental or veterinary furniture (e.g.: operating tables, examination tables, medical beds with mechanical fittings, dentists’ chairs) 12 Exchange rate from USO to RM in 2008 was converted based on average annual exchange rates in 2008 extracted from published information from Bank Negara Malaysia at USO 1=RM3.800 13 Exchange rate from USO to RM in 2014 was converted based on average annual exchange rates in 2014 extracted from published information from Bank Negara Malaysia at US01=RM3.2736 29
Medical bed, peripheral and accessory market size and imports of medical beds, peripherals and accessories (Malaysia), 2008-2014
* Market size and percentage imports over market size were computed by SMITH ZANDER. Conversions from USD to RM were computed by SMITH ZANDER based on the following exchange rates which were extracted from Bank Negara Malaysia:
2008: USD 1 = 3.3319 2009: USD1 = 3.5236 2010: USD1 = 3.2105 2011: USD1 = 3.0572 2012: USD 1 = 3.0785 2013: USD1 = 3.1511 2014: USD1 = 3.2736
Source: United Nations Comtrade Database, SSM, *SMITH ZANDER analysis Relevant Laws and Regulations Medical Device Act 2012 This Act stipulates that a medical-related product must be registered with the Medical Device Authority (“MDA”), through a web-based system called the Medical Device Centralised Online Application System (“MEDCAST”), before it can be imported, exported or placed in the market. For locally-manufactured medical-related products, the manufacturer has the responsibility to ensure that the medical product is registered, while the responsibility for the registration of imported medical products falls on the authorised importer or manufacturer’s representative. Failure to register a medical product will lead to a fine not exceeding RM200,000 or an imprisonment term of not more than three (3) years, or both. This Act also stipulates that an establishment (i.e. which refers to either the manufacturer or the authorised manufacturer representative) must hold a valid establishment license in order to import, export or place a medical-related product in the market. Failure to register an establishment will lead to a fine not exceeding RM200,000 or an imprisonment term of not more than three (3) years, or both. Medical Device Regulations 2012 For the purpose of the registration of medical devices, the classification and grouping of medical devices are specified in the First Schedule and Second Schedule of this Regulation, respectively. All medical devices must conform to the requirements as set out in the Third Schedule of this Regulation, and medical devices are subject to conformity assessment. As stipulated in the Fifth Schedule of this Regulation, the registration of medical devices involves application fees ranging from RM1 00 to RM750 and registration fees ranging from RM1 ,000 to RM5,000, in accordance to its classification or grouping. The application for an establishment license is subject to an application fee of RM250 and a licensing fee of either RM2,000 or RM4,000 (depending on the type of establishment, as stipulated in the Fifth Schedule of this Regulation). The renewal of an establishment license and the application for export permits are also subject to fees as stipulated in the Fifth Schedule of this Regulation. 30
The Sixth Schedule of this Regulation stipulates the mandatory labelling requirements for medical devices, such as the contents, format and language of the label, and the location of the label on a medical device. Employment Act 1955 The Employment Act 1955 stipulates the rights and welfare benefits that employees are entitled to, and rules and regulations which all employers are required to comply. This Act also states that an employer is required to obtain a license to hire legal foreign workers under the contract of services, and ensure their welfare and rights are fulfilled in terms of their wages, hours of work, rest days, as well as sick and annual leaves. The Ministry of Human Resource is responsible for monitoring and ensuring that companies are in compliance with the Act and protects the welfare of employees. Industrial Co-ordination Act 1975 The Industrial Co-ordination Act 1975 is an Act introduced with the objective of maintaining the coordination, orderly development and growth in Malaysia’s manufacturing sector. The Act requires manufacturing companies in Malaysia with shareholders’ funds of RM2.50 million and above or with 75 or more full-time employees to apply for a manufacturing license for approval by Ministry of International Trade and Industry (“MITI”). Applications for manufacturing license are to be submitted to the Malaysian Industrial Development Authority (“MIDA”), and this license will subsequently be approved and issued by MIT!. The licenses are non-transferable unless with prior approval obtained from MIT!. Competitive Overview The competitive landscape of the medical bed, peripheral and accessory industry in Malaysia comprises local medical bed, peripheral and accessory manufacturers; foreign manufacturers with local presence in Malaysia; and agents and distributors. (i) Manufacturers Manufacturers include companies involved in the design, manufacturing and assembly of medical beds, peripherals and accessories, and these activities are performed at their in-house manufacturing facilities. These manufacturers may either have their in-house brand(s) of medical beds, peripherals and accessories, or may be performing contract manufacturing for other medical bed, peripheral and accessory brands. A list of identified manufacturers in Malaysia is shown as follows: i Medical beds, peripherals i 30 April , L .__._.__.__. !_~nd ac:::~ssories ‘. 2015** i ‘ . ._c~ ~:~ Medical beds, peripherals, ! ‘ ‘ , accessories and medical !’ Malaysian Hospital ” idisposables (such as’, 30 Sep 2009 754 100 !i,,::Equipment Sdn Bhd ‘ drapes, masks, and’ , ‘ syringes)—–l –..J rMeditro-n–TurniiUre-Sd’l1T’Medical beds, peripherals, i ‘886 i Bhd i and accessories i 31 Dec 2014 : 7,776 i i,’, ~—————+———-,—,——~I.-_-,——,-,–~_, .__._.-j-,____ -J i Piyatech Sdn Bhd ! Medical beds i 30 Sep 2014 i 3,947 ! (72) I, “,:, Ii i-UMMI—MedTcaT—ufe;Medical beds, p-. i———-~~3 ! I Sciences Sdn Bhd i and accessories c 2014 ! 1,428 I :L-~ ,_~”” , ~ ,_~__,~_, ~__(, ,_,_, -: , ,..:.
6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d) , ! Sdn Bhd (subsidiary of i accessories and! 31 Dec 2014 (364) i ! UWC Holdings Sdn Bhd) i equipment I I ,——1 rVictor Steel Equipment! -MedicaT-beds.-periPheraTs-T-;~ec 2~~1 5,2;T 38 !i Sdn Bhd . and accessories i ! i i~TK Technol~;~es Sdn i Medical devices:i-~—-~—~i ——T , : equ.ipment, beds, ;! 31 December 17 157 :,: Bhd and WTK : 2014 1,489 i :,! Manufacturing Sdn Bhd penpherals and : ‘ I accessories i I ,–,-,—-,—,-,———–,—–~-~-,-,-~,—-~—-~—–, Notes: 1. Represents industry players involved in the design, manufacturing and assembly of medical beds, peripherals and accessories that were identified by SMITH ZANDER, and may not be exhaustive.
2. The above list is in alphabetical order.
3. Does not include companies whose core activities are as agents, traders and distributors of third party products.
4. Information on products and services are based on SMITH ZANDER’s secondary or desktop research on information made publicly available as at 11 March 2016.
5. Latest available financials filed with SSM as at 11 March 2016.

* SMITH ZANDER has carried out research and analysis to identify the above companies, and their products and services ** The revenues for LKL International Berhad are for the FYE 30 April 2015 as it was deemed the most comparable time period due to the fact that the latest FYE available for most other industry players were either as at 30 September 2014 or 31 December 2014. Source: SSM, various company websites, LKL International Berhad, SMITH ZANDER analysis (ii) Foreign manufacturers with local presence Foreign medical bed, peripheral and accessory manufacturers are largely based in the United States, Sweden, Australia, Japan, China and India. Many of these foreign medical bed, peripheral and accessory manufacturers do not have manufacturing facilities in Malaysia, and are represented through local agents and/or distributors in the domestic market. For example, Paramount Bed Co Ltd, a medical bed, peripheral and accessory manufacturer, distributes their products in Malaysia through Malaysian Healthcare Sdn Bhd. Stryker Corporation is a manufacturer of medical beds, peripherals, accessories, devices and equipment based in the United States, with a local sales office in Petaling Jaya, Malaysia, through Stryker Corporation (M) Sdn Bhd. Stryker Corporation (M) Sdn Bhd does not have a manufacturing facility in Malaysia.
I : equipment ___, -l , ,,_,~ !______ ____’~~ ~ ~~_J…._~_ Note: * SMITH ZANDER has carried out research and analysis to identify the above companies, and their products and services Source: SSM, Stryker Corporation’s website
(iii) Agents and distributors Local medical bed, peripheral and accessory manufacturers, to some extent, also compete with local agents and distributors of medical beds, peripherals and accessories. Agents and distributors refer to companies involved in the distribution of third party brands of medical beds, peripherals and accessories to local public and private hospitals and medical centres, and some of these brands may be imported from foreign countries. Examples of identified medical bed, peripheral and accessory agents and distributors include:
• Medical beds, peripherals and accessories Antah Sri Radin Sdn Bhd • Medical disposables (such as drapes, masks, and syringes) (part of the Antah Healthcare • Medical devices and equipment Group) • Servicing and maintenance
• Medical beds, peripherals and accessories

Esco Marketing Services (M) Sdn • Medical disposables (such as drapes, masks, and syringes) Bhd • Medical devices and equipment
• Repair and servicing
• and accessories
• Medical disposables (such as drapes, masks, and syringes)
• Medical devices and equipment

Hospimetrix Sdn Bhd • Servicing, maintenance and equipment calibration
• Installation, testing and commissioning
• loan and services
• Medical beds, peripherals and accessories
• Medical disposables (such as drapes, masks, and syringes)
• Medical devices and equipment

lOS Medical Systems Sdn Bhd • Servicing, maintenance and equipment calibration
• Installation, testing and commissioning
• Leasing, loan and rental services
• Project management and installation

• Medical beds, peripherals and accessories Lifeline Innovators Sdn Bhd
• Medical devices and equipment
• Exercise equipment
• beds, peripherals and accessories
• Medical disposables (such as drapes, masks, and syringes)
• Medical devices and equipment

 

• Servicing and calibration Malaysian Healthcare Sdn Bhd
• Installation
• Home delivery services
• Home therapy services (such as acute or chronic back or neck pain management, stroke and neuro rehabilitation, paediatric rehabilitation)
• Medical beds, peripherals and accessories
• Medical disposables (such as drapes, masks, and syringes)
• Medical devices and equipment

 

Mikromedik Sdn Bhd • Hospital apparel, blanket and underbed covers
• Medical stainless steel ware (such as feeding cups, catheter trays, bedpans and dental trays)

 

6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d) • Medical beds, peripherals and accessories  • Medical disposables (such as drapes, masks, and syringes)  Pinang Medical Supplies (PMS)  • Medical devices and equipment  Sdn Bhd  • Medical stainless steel ware (such as feeding cups, catheter  trays, bedpans and dental trays)  • Exercise equipment
1. Represents examples of agents and distributors of medical beds, peripherals and accessories that were identified by SMITH ZANDER, and is not eXhaustive. These agents and distributors were selected on the basis that sufficient information on their business and financials were attainable in order for SMITH ZANDER to qualify them as a medical bed, peripheral and accessory agent or distributor.
2. The above list is in alphabetical order.
3. Does not include companies whose core activities are in the manufacturing of medical beds, peripherals and accessories.
4. Information on products and services are based on SMITH ZANDER’s secondary or desktop research on information made publicly available as at 11 March 2016.

* SMITH ZANDER has carried out research and analysis to identify the above companies, and their products and services Source: Various company websites, *SMITH ZANDER analysis Market Share In 2014, the medical bed, peripheral and accessory market size in Malaysia, which is defined as the sum of local industry manufacturers’ revenues, and imports of medical beds, peripherals and accessories, net of exports by local industry players, was approximately RM77.6 million. LKL International Berhad, via its subsidiary LKL Advance Metaltech Sdn Bhd, garnered a market share of 40.5% in 2014, based on its revenue contribution from Malaysia of RM31.4 million for the FYE 30 April 2015. Market share (Malaysia), 2014* Notes:
* Market share in 2014 was computed by SMITH ZANDER, based on LKL International Berhad’s revenues and the medical bed, peripheral and accessory market size in Malaysia. 1. Latest available data is as at 2014 as 2014 is the latest year where financial information of most of the identified industry players are available.
2. LKL International Berhad’s revenues were taken as at FYE 2015 as LKL International Berhad’s FYE is as at 30 April while the latest FYE available for most other industry players were either as at 30 September 2014 or 31 December 2014.
3. Based on LKL International Berhad’s revenue contribution from Malaysia.

Source: SSM, LKL International Berhad, *SMITH ZANDER analysis
5 PROSPECTS AND OUTLOOK FOR LKL INTERNATIONAL BERHAD The prospects for growth in the medical bed, peripheral and accessory industry in Malaysia are positive as the industry is expected to continue being driven by the growth in demand for healthcare services globally as well as domestically. Global healthcare expenditure has demonstrated strong positive growth over the last decade, from USD4.3 trillion (RM16.3 trillion14) in 2004 to USD7.5 trillion (RM23.6 trillion15) in 2013, representing a CAGR of 6.4% during the period. Meanwhile, total healthcare expenditure in Malaysia also grew from RM17.8 billion in 2004 to RM41.0 billion in 2013, at a CAGR of 9.7%. In 2013, public healthcare expenditure comprised 52.0% of total healthcare expenditure, while private healthcare expenditure comprised the remaining 48.0% of total healthcare expenditure in that year. Healthcare expenditure is expected to continue to be driven by the prevalence of chronic diseases, growing ageing population, increasing accessibility to healthcare services due to growth in income and/or an uptake of medical insurance, as well as national government initiatives to support and promote the growth of the healthcare services industry. In addition, Government initiatives to promote the medical bed, peripheral and accessory industry is also expected to boost the growth of the industry in Malaysia. In 2008, the medical bed, peripheral and accessory industry in Malaysia had a market size of approximately RM40.2 million, and this grew to approximately RM77.6 million in 2014, at a CAGR of 11.6%. Moving forward, the industry is estimated to grow, in terms of market size, from RM86.3 million in 2014 to RM118.9 million in 2018, at a CAGR of 11.3%. There is a latent demand for medical beds in Malaysia when comparing against global benchmark standards. Malaysia’s number of medical beds per 1,000 population was 1.9 in 2014, which was lower than the developing country average of 2.2 medical beds per 1,000 population and the world average of 3.0 beds per 1,000 population. This denotes that there is a need for more medical beds in Malaysia, indicating the potential for growth in the industry. According to the 11 th Malaysia Plan, the Government of Malaysia announced its aim to achieve universal access to quality healthcare, and in doing so aims to increase the medical bed ratio to 2.3 beds per 1,000 population. If Malaysia meets this target, Malaysia has the potential to grow its net increase of new medical beds by another 17,998 medical beds to 75,569 medical beds in the future. Over the longer term, should Malaysia continue to grow and if the country meets the world average of 3.0 beds per 1,000 population, the estimated net increase of new medical beds in the country is expected to grow by a further 22,999 beds to 98,568 medical beds. The growth potential for medical bed, peripheral and accessory industry players in Malaysia is not just limited to the demand from within the domestic market, as industry players may tap into the latent demand present in international markets as well. There is a latent demand for medical beds in most developing countries, particularly in Asia, Middle East and Africa, and this is indicated by the lower developing country average of 2.2 medical beds per 1,000 population relative to the world average of 3.0 beds per 1,000 population. With 2.2 medical beds per 1,000 population, developing countries are estimated to collectively have 11.3 million medical beds in 2013. If the average number of medical beds per 1,000 population in developing countries is able to meet the world average of 3.0 medical beds per 1,000 population in the future, the total number of medical beds in developing countries could reach 15.4 million beds, indicating a latent demand of 4.1 million medical beds. This potential increase of 4.1 million medical beds signifies the vast opportunities present in developing countries in Asia, Middle East and Africa. 14 Exchange rate from USD to RM in 2004 was converted based on average annual exchange rates in 2004 extracted from published information from Bank Negara Malaysia at USD1=RM3.800 15 Exchange rate from USD to RM in 2013 was converted based on average annual exchange rates in 2013 extracted from published information from Bank Negara Malaysia at USD1=RM3.1511 35
SMITH ZANDER
LKL International Berhad, as one of the key industry players in the medical bed, peripheral and accessory industry in Malaysia, shows potential to gain from the growing domestic and international demand. In 2014, LKL International Berhad’s market share in Malaysia was 40.5% based on its revenue contribution from Malaysia of RM31.4 million for the FYE 30 April 2015. With their track record and technical capabilities, as well as their strong position in the domestic market, LKL International Berhad is poised to increase its presence in the local medical bed, peripheral and accessory industry, as well as capture opportunities in the export markets, particularly in the developing countries in Asia, Middle East and Africa. [The rest of this page is intentionally left blank]

 

 

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