Singapore Medical Group - RHB Invest 2017-12-19: Driving Synergies Within A Larger Group

SINGAPORE MEDICAL GROUP LTD 5OT.SI

Singapore Medical Group - Driving Synergies Within A Larger Group

Singapore Medical Group (SMG) has made a couple of acquisitions into different medical specialities like imaging diagnostics, gynaecology and also recently, paediatrics. On top of its existing medical specialities, we believe that the group would start to benefit from the synergies and cross-selling benefits.
In addition, management is still looking for more acquisitions to fuel growth, hiring more doctors while at the same time, optimising processes as it goes along to improve utilisation. As a result, we maintain BUY with an unchanged DCF-based TP of SGD0.79 (39% upside).

The new facility spanning 5,500 sq ft was opened to cope with the increasing demand for its imaging diagnostic services, boosted both organically and its acquisitions previously.
The centre would provide a comprehensive range of cross-disciplinary radiology services.

Singapore Medical Group (SMG) remains bullish on Vietnam. Management has hired a paediatrics leader to spearhead growth initiatives at its Careplus clinics in Vietnam. It has also implemented growth initiatives at the two 15,000 sq ft clinics and hopes to see profitability by end-FY18.
Its eye clinic in Jakarta, which was loss making, is now showing signs of growth and profitability.

Management has revealed that it is keen to scale up the paediatrics segment. This comes after its recent acquisition of paediatric clinics in Toa Payoh and Bishan, which has propelled it to be one of the largest practitioners in the private sector dedicated towards women’s health, wellness and now, children.
It would likely add more paediatricians organically going forward and set up new clinics to fuel growth in this segment.

Management is keen to expand into new medical segments like cardiology, dental paediatrics and further expand into aesthetics. However, it is likely to be making smaller acquisitions than before, targeting single-digit multiple acquisitions.

With a turnaround now further validated by both organic and inorganic growth, we maintain our BUY recommendation on Singapore Medical Group (SMG).
We also expect it to also make more accretive but smaller-sized acquisitions in the near term, thereby hastening its growth. It would also be hiring more doctors while at the same time optimising processes as it goes along to improve its utilisation.
We expect a stronger 2H17, mainly due to a seasonally stronger 2H, as well as the full earnings accretion from its Astra Women's Specialist group of clinics (Astra) and paediatric acquisitions.

Singapore Medical Group (SMG) is one of the 2018 Top Stock Picks by RHB Invest.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-12-19

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.790 Same 0.790