TALKMED GROUP LIMITED
5G3.SI
Talkmed Group Ltd - Softer outlook for medical tourism
- FY15 core net profit was slightly above our full-year numbers at 106%.
- Associate HKIOC remains loss-making at S$2.9m, expected to breakeven in FY17.
- Excluding the loss-making associate, FY15 net profit rose 4.4% yoy.
- A stable healthcare play with long-term demand for oncology specialist services, in our view.
- Currently trading at a FY17F P/E of14.4x, with dividend yield of 5.2-5.5%; we reiterate our Add recommendation.
■ 4Q15 top line was the best quarter for the past 3 years
- TKMED reported 4Q15 revenue of S$18.0m, which grew 3.5% yoy and 14.6% qoq, on the back of fewer patient visits but offset by higher-intensity care required by patients.
- On a full-year basis, revenue climbed 4.0% yoy but a S$2.9m loss from an associate impacted the bottom line, causing net profit to fall 3.5% yoy.
■ Operating lease expenses: the new norm
- Employee benefits were higher in FY15 by 8.1% as staff salaries were adjusted upwards, together with additional headcount (current staff strength at 13 doctors).
- Operating lease expenses surged 69.1% yoy due to new operating leases effected in Nov-14, Mar-15 and Jun-15.
■ Good progress at associate TKMED acquired a 30% stake in Hong Kong
- Integrated Oncology Centre Holdings Limited (HKIOC) – an integrated oncology specialist offering both diagnostics and treatment services in Hong Kong – in Jun-15.
- Patient visits have been encouraging thanks to publicity efforts, but HKIOC remains loss-making due to high fixed costs (rental etc.).
- Management expects it to break even in FY17.
■ Some headwinds in medical tourism industry
- We see certain headwinds in the medical tourism industry:
- the appreciation of the Singapore dollar against regional currencies; and
- a weak macroeconomic outlook in neighbouring countries.
- Should these persist, we expect minimal growth in patient numbers over the near term.
■ Reiterate ADD with DCF-based target price of S$1.29
- We tweak our forecasts to account for the new operating leases, and our FY16-17 EPS estimates fall slightly by 0.4-0.7%. Our DCF-based target price hence drops marginally to S$1.29 (WACC: 8.4%).
- We reiterate our Add recommendation as TKMED is currently trading at what we view as an undemanding valuation – FY17F P/E of 14.4x, vs the industry peer average of 34.3x.
- Potential re-rating catalysts include a faster-than-expected turnaround of its associate, while the key risk is high reliance on its CEO and founder, Dr Ang.
William TNG CFA
CIMB Securities
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NGOH Yi Sin CFA
CIMB Securities
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http://research.itradecimb.com/
2016-02-29
CIMB Securities
SGX Stock
Analyst Report
1.29
Down
1.30
