The Tribune

By RICHARD COULSON

Investors should take a close look at Doctors Hospital Health System (DHS), our only non-Government full-service medical centre. DHS has never attracted much attention because of its small market capitalisation - ten million shares outstanding, trading at about $2.20 per share. But its recent Annual Report for the fiscal year to January 31, 2019 (released in June) should be required reading for it is positive news.

Net income increased 67 percent from $2.405m in 2018 to $4.040m in 2019, with earnings per share rising from $0.24 to $0.41. This is not a one-year accounting fluke: in the six years 2014-2019, revenue rose from $48m to $60m, with net income growing from a small loss to the positive $4.040m. In addition to an increase in patient days by more than 16 percent, last year’s improved financial picture resulted from one major factor: better management of receivables due from self-pay patients and from health insurance companies. The loss allowance expense dropped from over $2.5m to $470 thousand. Clearly, better control systems had been put in place.

DFS illustrates the story of a successful venture founded as a personal dream. The late Dr Meyer Rassin (1909-1989) came to The Bahamas as an RAF surgeon serving the thousands of pilots training here during World War II. He and his wife returned in peacetime to establish the Rassin Clinic, where he was the hard-boiled care-giver to many Bahamians.

Their son Barry took a degree in hospital administration and inherited the business, expanding it to become the present Doctors Hospital and serving as chief executive, while recruiting our leading physicians and medical staff.

In 2000, DHS launched a public offering of its shares, sold mainly to its staff MDs. The early years as a public company listed on BISX left disappointed investors facing slow capital growth and minimum dividends, but modern medical systems and business management principles have reversed the trend, as shown by the published figures. Following his growing interest in leading Rotary International, Barry resigned from any executive role and sold his equity stake to Bahamian Dr Charles Diggis, a long-time surgeon and successful medical entrepreneur, who is the Hospital’s president and chief medical officer.

Last year, the board elected a new chairman, renowned businessman Felix Stubbs who had retired after many years of leading IBM’s local operation. Dennis Deveaux, a chartered accountant and former KPMG partner, was hired as the first full-time chief financial officer, keeping immediate computer surveillance over charts of patients‘ receivable accounts.

Growth of any hospital’s earning is limited by size - number of rooms available for patient service. Constricted in its present location, the DHS board last year decided to build a separate unit. The board detected a strong demand for lower-cost, longer-residency, treatment for patients in a recovery mode, and architects’ plans have now been completed for a 30-room skilled nursing facility to be called Doctors Hospital Harbourside.

Scheduled to open in early 2021, construction is being financed by bank borrowing The balance sheet now carries long-term debt of about $4m, but this stands against equity of $35.6m and should be easily serviced.

In recent months, the DHS share price quoted on BISX has risen about 20 cents to $2.40, a welcome increase but still giving a price/earnings ratio of only 6X, absurdly low for a profitable dividend-paying company with well planned prospects for future growth. DHS bargain-price shares could be snapped up, if only our broker-dealers ever recommended them.

Although DHS faces far fewer problems than our public health system, we wonder if its proven management expertise could not be adapted to help Princess Margaret Hospital.

Oil in The Bahamas

The prospect of oil being extracted or refined in The Bahamas has ardent supporters, opposed by intractable critics. Two very different ventures are the targets of their scrutiny, one transparent, the other opaque.

The first is Bahamas Petroleum Company (BPC), founded over ten years ago by offshore investors, primarily UK investment funds, to explore once again the presence of undersea oil deposits in Bahamian waters.

They have spent possibly $70m, without a penny of Government funds, investigating a potentially productive zone southwest of Andros near the maritime Cuban border. This has paid for extensive geographical and seismic research, leading to Government granting licences (now extended to end 2020) for drilling in five precise locations, as well as the cost of Environmental Impact and Mitigation studies, and expenses of a small Nassau office with resident managing director, Simon Potter.

Since BPC’s parent company is registered in the Isle of Man - and its shares are listed on London’s alternative exchange for smaller companies - every detail of BPC’s ownership, operations and finances is publicly reported. Mr. Potter has always made clear BPC’s success depends on finding oil in commercial quantities, and this requires a major oil company joining as a farm-out partner to provide the capital for drilling . BPC’s only income has been a $1 million option payment received in 2018 from such a major, who chose not to exercise on the option’s termination.

Mr. Potter and his fellow directors are working hard to sign up a similar investor. In his progress report of April 28 when WTI oil was trading at $65, he forecast a “sustained recovery in oil prices”, but unfortunately there’s been a downward to the mid-$50s. The lower the price, the less incentive there is for investment in new fields like The Bahamas.

I continue to hope that market conditions will reverse so that BPC can find oil and operate profitably. Its sharing agreement with Government could bring substantial revenue to our Treasury, far outweighing the highly theoretical risks from an oil spill that so deeply concern our vociferous environmental lobby. 

And then there’s Oban

Our second oil-related venture is Oban Energies, a very different animal. The Heads Of Agreement signed in February 2018 contemplated importing foreign crude oil to a Grand Bahamas facility where it would be stored, refined and shipped to buyers in the US and elsewhere, an ambitious scheme projected to cost no less than $5bn. This HOA soon had be disavowed by our Government, at great embarrassment to Prime Minister Minnis. The Oban chairman and later its CEO were both quick to depart.

Nevertheless, Oban’s name continues to pop up, run out of its Florida suitcase office in Palm Beach Gardens. A public meeting was held in Freeport last year, at which a recruited crowd of Bahamians spoke favourably, based on promises of employment in construction and subsequent operations.

Meanwhile, the Bahamas National Trust expressed its implacable objection because of threatened environmental damage to several parks and nature preserves

A Government committee headed by Labour Minister Dion Foulkes has continued to negotiate with a young man whom I have met named Alexander Grikitis, identified as Oban’s president and managing director.

Mr Grikitis makes periodic public statements about great progress in creating a new HOA and Environmental Impact Statement and resolving business and financial issues, although we have not heard the results of any meetings, if actually held.

The Oban website carries the names of qualified foreign experts with the ambiguous title of senior advisory director, but these gentlemen have remained invisible.

Oban has never given the slightest hint about the identity of any company or investor backing its activity or paying its expenses, let alone providing or capable of borrowing the vast capital needed to build its project. These profound uncertainties precede any expectation about easing environmental concerns.

The 1983 James Bond film “Never Say Never Again” was partly shot in The Bahamas. Oban may now be facing a real-life Bahamian “never”.