Singapore Medical Group - RHB Invest 2017-08-16: A Stronger 2H17F Ahead

Singapore Medical Group - RHB Invest 2017-08-16: A Stronger 2H17F Ahead SINGAPORE MEDICAL GROUP LTD 5OT.SI

Singapore Medical Group - A Stronger 2H17F Ahead

  • Singapore Medical Group (SMG) reported a strong 1H17 boosted with its healthcare segment (+42.3% YoY) and its diagnostic & aesthetics segment (+125.7% YoY), which was aided by its Lifescan & Astra acquisitions. 
  • However, with only 4.5 months of Astra recorded in the 1H17 and coupled with a seasonally stronger 2H, we expect a better 2H17F ahead. 
  • 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 its utilisation. 
  • Maintain BUY with an unchanged DCF-backed TP of SGD0.79 (27% upside).

Expanding its paediatrics department. 

  • Management has revealed that it is keen to scale up the paediatrics segment. This comes after its recent acquisition of the 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 and wellness and now, children. 
  • It would likely add more paediatricians organically going forward and set up new clinics to fuel growth in this segment.

New diagnostic centre at Novena Medical Hub. 

  • 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.

Overseas expansion gaining traction. 

  • 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-FY18F. 
  • Its eye clinic in Jakarta, which was loss making, is showing signs of growth and profitability.

Looking into other medical streams. 

  • 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 then before, targeting single-digit multiple acquisitions.

Maintain BUY with an unchanged DCF-derived SGD0.79 TP. 

  • With a turnaround now further validated by both organic and inorganic growth, we maintain our BUY recommendation on 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 2H17F, 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.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-08-16
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.790 Same 0.790