CIMB Securities 2015-08-11: Talkmed Group Ltd - 2Q15 Results; Stable healthcare play. Maintain BUY.

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TALKMED GROUP LIMITED 5G3.SI

Stable healthcare play 

• TalkMed’s 1H15 results were in line with our expectations, with revenue and net profit at 48% and 49% respectively of our full-year forecasts. 
• An interim dividend of 2.3Scts per share has been declared, representing a 6.1% increase yoy and in line with its dividend payout policy of 75% of net profit. 
• The long-term demand for medical oncology services remains positive, and we tweak the numbers slightly to factor in associates’ losses, paring down our FY15-16 EPS estimates by 2%. 
• Our DCF-derived target price of S$1.27 (WACC: 8.4%) remains unchanged and we maintain an ADD rating. 

Performed as expected 

• 2Q15’s revenue grew marginally by 1.7% yoy, due to an increase in revenue from patients requiring higher intensity care. 
• The number of patient visits to TalkMed has stayed relatively stable, while the number of doctors has grown to 13 to cope with the larger scale of business. 
• We saw a 54.9% rise in operating lease expenses from S$0.19m in 2Q14 to S$0.29m in 2Q15 as a result of new operating leases effected in Mar and Jun 15. 

Re-investing the extra cash 

• Besides co-investing in Stem Med, a provider of cellular therapy-related medical services, with StemCord for S$1.8m in Jan 15, TalkMed also recently acquired a 30% stake in Hong Kong Integrated Oncology Centre Holdings Limited (HKIOC) for S$11.5m, signalling its first overseas venture. 
• As these investments are still in the early stages, there was a share of loss after tax of associate of S$0.26m attributed to HKIOC, which had only operated for about a month. 
• We project HKIOC to incur S$1m of share of loss for FY15-16 annually before possibly breaking even in FY17. 

Stable business and financials 

• We continue to like the oncology specialist business that TalkMed offers, especially in an environment where the incidence of cancer is on an upward trend. 
• According to the National Registry of Diseases Office in Singapore, 13,416 people were diagnosed with cancer in 2014, vs 12,651 in 2013 and 12,295 in 2012. 
• Its net cash position (no debt) and FY15-17 forecasted dividend yield of 4.1-4.6% also makes TalkMed more attractive than other healthcare plays in Singapore. 
• However, one key risk to the business is the high reliance on key founder and CEO, Dr Ang.

William TNG CFA | NGOH Yi Sin | http://research.itradecimb.com/ CIMB Securities 2015-08-11

BUY Maintain BUY 1.27 Same 1.27