Singapore O&G Ltd (SOG SP) - Maybank Kim Eng 2017-09-19: NDR Highlights On Growth Strategy And Key Challenges

SGinvestors.io

SINGAPORE O&G LTD. 1D8.SI

Singapore O&G Ltd (SOG SP) - NDR Highlights On Growth Strategy And Key Challenges

Discussed growth strategy & reasons for soft 1H17 

• We hosted a NDR for Singapore O&G (SOG) in Singapore. Key discussions included:
  1. organic growth strategy, focusing on recruitment of new doctors to grow complementary segments;
  2. weak 1H17 results due to temporary impact from Zika Virus in 2H16 and start-up costs for two new doctors; and
  3. weaker medical tourism in 1H17, which has impacted SOG’s dermatology segment. 
• We note that the healthcare segment could face challenges from softer demand from medical tourists, potentially tighter regulations to prevent excessive charges and more emerging listed peers.

Organic growth strategy and exploring new segments 

• SOG highlighted its key growth strategy, which focuses on recruiting high potential doctors mainly from the public sector. SOG then offers access to an established patient pool, which enhances its cross-selling platform to capture more patients, especially those that it currently refers to third-party doctors. 
• Paediatric is a new complementary segment it has just started; one doctor joined in Jul 2017 and another one will start in Nov 2017. SOG aims to add at least two new doctors each year. 
• It is also exploring other segments, including fertility treatments and orthopaedic.

Temporary weakness in 1H17 due to one-off events 

• The key reasons for the weaker 1H17 were due to:
  1. lower live births as the Zika Virus, which started in Jul 2016, caused many families to defer births;
  2. start-up costs from two new specialists hired in mid-2016; and 
  3. weaker performance in the dermatology segment due to slower medical tourism. 
• Management expects a better 2H17, as the number of live births has normalised and the two new specialists are making good progress. The patient load for dermatology segment has also improved.

Challenges in the healthcare sector 

• Management highlighted several key challenges in the healthcare sector: 
  1. softer demand from medical tourists as Singapore’s charges are becoming more expensive vs its neighbours;
  2. potentially tighter regulations to rein in excessive pricing; and
  3. more listed healthcare companies with similar growth strategies could dilute investors’ attention.

NOT RATED
Target Price: N/A

John Cheong CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-09-19

Maybank Kim Eng SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998.000 Same 99998.000