Asia Medical Enviro Frontline workers

Portfolio: Dymon Asia and AMES

October 20, 2022

For all the hubbub about digital businesses taking flight during the pandemic, few categories saw as much upside as traditional medical waste disposal. Dymon Asia Private Equity is enjoying the ride

Dymon Asia Private Equity acquired Singapore-based UEMS, a regional hospital management business, in 2014. It grew EBITDA more than 3x and exited two-and-a-half years later, generating a 6.9x return and and a 102% IRR. The experience set up a carve-out of a healthcare unit of Sembcorp in 2018. At first, that investment didn’t necessarily appear on track to repeat the success of UEMS. Then COVID-19 happened.

Dymon paid S$20 million ($15 million) for Asia Medical Enviro Services (AMES), a Singapore-based unit of Sembcorp, committing capital from its second fund, which closed that year at $450 million. Local engineering company Tee International participated as a minority shareholder to provide technical support, but Dymon bought it out within six months.

AMES was recognized as the local leader in medical and biohazardous waste disposal before COVID-19, but the pandemic has been transformative.

Overall market share has increased 10% since 2018 to about 75%. This includes more than 70% of government-run hospitals and over 50% of the “healthcare” sector. The latter encompasses private hospitals and clinics, veterinarians, research labs, and pharmaceutical companies, as well as COVID-related sites such as vaccination centers, quarantine hotels, and isolation facilities.

Meanwhile, the market has exploded. Many official figures remain to be collated and medical waste tonnages are a matter of some sensitivity to the Singaporean government. However, the trickle of data currently available reveals a surge in the volumes of biohazardous material that service providers must deal with.

Into the storm

Singapore’s National Environment Agency has tracked a modest and steady increase in the amount of medical waste produced by the city-state of 5% a year between 2016 and 2020, culminating to an average of about 16 metric tons a day, pre-pandemic. According to researchers at the University of Phayao, that figure rose more than 1,000% to about 186 metric tons a day after the outbreak.

There is reason to believe relatively strict environmental and safety compliance norms —including more universal access to personal protective equipment (PPE) — have exaggerated the opportunity locally. Manila, Jakarta, Kuala Lumpur, Bangkok, and Hanoi each saw their daily medical waste tonnages increase about fivefold when the pandemic hit, according to Statista. Huge lifts but still only half the size of the Singapore surge in percentage terms.

AMES’ revenue and EBITDA began climbing dramatically in 2020. Each has grown 40% per year and is set to be roughly double its 2019 level by 2022; Dymon and the company declined to specify the totals in dollar terms. At the time of acquisition, Tee disclosed that net profit was S$2.5 million in the 2017 financial year, down from S$2.7 million the year before.

“The biggest increases in contract growth and sales growth were in the second quarter last year during the peak of the crisis,” says Gabriel Ho, a managing director at Dymon, who led the UEMS and AMES deals. “But even after things have normalized, or at least stabilized, our sales and EBITDA have continued to grow.”

AMES has about six significant competitors in the biohazardous waste services space, which put pressure on the company to be proactive about filling new demand created by COVID-19. Dymon provided an initial edge by anticipating a local outbreak as early as January 2020, when it began buying protective equipment.




“Just before the crisis became full-blown, we started stocking up,” Ho says. “It helped particularly that when there were huge shortages globally for protective equipment, hand sanitizers and masks, we were able to provide them to our staff for free and successfully implement strict safety protocols. So, as a company, we had all the PPE we needed for our normal operations, but more importantly, our people were comfortable and felt safe coming to work.”

AMES increased headcount from 25 to 38, including a 70% jump in the number of frontline workers, and expanded its fleet about 50% to 15 trucks. But resources remain stretched given the sudden supply-demand mismatch.

In a typical collection routine, an AMES truck driver, operating alone, will circulate between sites and making pick-ups, starting before 7 a.m. to avoid disrupting morning traffic at hospitals. The largest institutions can have as many as 60 bins of waste, which must be manually loaded into the truck. The entire fleet covers 500-600 sites per day.

Last year, AMES managed to increase the frequency of its collections service to two pick-ups a day for its biggest customers despite the shortage of manpower; normally it’s only one collection per day. It has since reduced back to one trip per day per customer but remains on standby for those additional trips if required.

“Before COVID, it was normal for our drivers to cover some ad hoc collections beyond the scheduled collections, and we had the capacity to take on any excess volume. Now, our plant is running close to full capacity and there’s no way we can do that,” says Doris Tham, deputy general manager at AMES.


Health and safety

There were a number of technical improvements to operations during this time, including an upgrade of the plant with a new shredder and filtration technology, as well the implementation of a GPS system for optimizing fleet navigation.

The most significant changes were on the environmental, social, and governance (ESG) front, however, especially in terms of employee health and safety. Office, plant and fleet disinfecting services were ramped up. A safety awards incentive was introduced, and salaries were increased by more than 50% on average.

Frontline workers facing social stigmas — landlords could legally bar them from returning home — were offered accommodation in three-star hotels, rather than the crammed dormitories provided by most small to medium-sized enterprises (SMEs). The resulting loyalty and motivation quickly translated into business results.

AMES claims to have never had a staff member contract COVID-19 and never experienced a disruption in its waste collection services due to the pandemic. As a result, the company’s 1,000-strong contract book ticked up only marginally, but new clients included major hospitals that were compelled to abandon less reliable service providers.

“Some of our competitors faced manpower constraints, but we managed to deliver our service without any disruption and helped cover the industry’s shortfall and ease the industry capacity bottlenecks. That’s one of the reasons why some major healthcare institutions switched their contracts over to us. And that performance was driven by focusing on worker health and safety,” Ho says.

“We prioritized our staff and our customers. We didn’t focus on profit at that time. That was important because for our customers, service quality and reliability is more important than price. Due to the nature of our services, these are things they absolutely cannot risk.”

In hindsight, a focus on quality and consistency despite higher operational costs is a no-brainer in a mission-critical industry. If failure to deliver promised services results in nationwide disease contagion and environmental damage, one simply does not fail. But in the heat of the pandemic’s worst weeks, when supplies ran short, budgets ran thin, and worker morale was low, logic could be elusive.

Biohazardous waste players with more bureaucratic management structures were at a relative disadvantage during this period. And indeed, AMES would have been among them prior to its private equity buyout.

“Whenever we needed approvals, we had to go through several different levels of management, as well as a legal department,” says Tham, who was with the company in its Sembcorp years. “Some of these documents had to be sent through this approval process, and rounds of changes would come back to us before we could finalize a tender submission —it could take one to two weeks. Now, I can go directly to Gabriel, who is hands-on, close to the situation on the ground and can get things done in one day.”

A lag in approvals can be serious in this industry. Under Sembcorp, AMES had to get at least three quotes from different maintenance service providers in the event of an equipment breakdown. This risked unacceptably long plant shutdowns — especially if the spare parts companies aren’t playing ball.

“We’ve had vendors and service providers tell us they would not give us a quote because they knew we were just getting it for the sake of comparison,” Tham says. “It was very stressful for our operational managers to have to deal with all these quotations and layers of approvals every time there was an operational issue because our plant needs to run 24-7. The staff is much happier now. Turnover is zero.”


Long-term view

For Ho, this is all part of the private equity offering. The long-term viewpoint that goes with the asset class made safety and business continuity plans more feasible levers to pull at a time of crisis and scrambling to fill spiking demand. It also gave Dymon the luxury of making a patient, holistic survey of business needs, from plant and logistics upgrades to team welfare, and the greater contract negotiating leverage that improving these areas entails.

Understanding of the customer side of the equation likewise proved indispensable. Dymon’s experience operating hospitals with UEMS not only delivered valuable industry networking advantages – AMES and UEMS have engaged in some joint ventures — it taught the GP how to engage with regulators and sell its waste collection services most effectively.

All of Dymon’s value-add work was financed with AMES’ existing cash flows, including the acquisition of Tee’s minority holding. More than 25% of the initial investment costs have been distributed back to LPs and the private equity firm still holds 100% of the business.

“The idea of incentivizing performance is part of the private equity mindset that really made a difference,” Ho says. “Unlike a typically family business or a smaller SME, where there may be more concerns about costs, profits and maximizing short-term gains, we were able to do better at focusing on ESG and staff’s safety and wellbeing.”

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