Singapore Medical Group (SMG SP) - Maybank Kim Eng 2017-11-29: Gaining Market Share And Growing Overseas

Singapore Medical Group (SMG SP) - Maybank Kim Eng 2017-11-29: Gaining Market Share And Growing Overseas SINGAPORE MEDICAL GROUP LTD 5OT.SI

Singapore Medical Group (SMG SP) - Gaining Market Share And Growing Overseas

Gains in Singapore, Vietnam, and Indonesia 

  • We hosted Singapore Medical Group (SMG)’s CEO, Dr Beng in a NDR. Key takeaways:
    1. SMG targets further gains in market share and the consolidation of five key specialties in Singapore, including obstetrics & gynaecology (O&G), oncology, health screening, paediatrics and aesthetics; and
    2. overseas markets have shown good progress, with Vietnam achieving a larger scale than Singapore in terms of the no. of doctors. Indonesia is also showing healthy progress and has broken even recently. 
  • Maintain BUY and TP of SGD0.78 based on 27x FY18E EPS (average of 2-year forward mean of small-cap healthcare peers in Singapore).

Targeting five key specialties for Singapore 

  • Management highlighted that given the limited industry growth in Singapore, it has to focus on consolidation and gaining market share to grow. It has achieved a notable position in O&G and health screening.
  • Also, it aims to build a good brand name and a leadership position in five key specialties via a combination of acquisitions and recruitment.
  • Acquisitions will enable rapid access into new specialities, while recruitment of young doctors will ensure good succession planning and scalability. Good brand and reputation could serve as an effective springboard for overseas expansion as patients in overseas markets also highly value safety and reliability.

Positive on overseas markets 

  • Vietnam operations have shown good progress and one of the medical centres has achieved profitability, while the second one should be profitable by end-2018. The number of patients have grown to 2,000/month from zero in April 2017. 
  • Also, the scale of operations is bigger than in Singapore, with two 15k sq ft medical centres and around 60 doctors vs 45 doctors in Singapore. Its paediatrics specialty is the biggest there, followed by O&G and health screening. 
  • On the other hand, operations in Indonesia have also recently turned profitable after more than three years of operations.

Swing Factors


  • Increasing discovery could lead to a rerating of the shares. A longer-term scenario incorporating 27x FY19E EPS suggests 61% upside to a TP of SGD0.92.
  • More M&A: we have not factored in any future acquisitions. Every SGD1m profit acquisition could raise FY7E EPS and TP by at least 7%.
  • Faster-than-expected earnings growth from existing businesses and newly-acquired entities.


  • Failure to integrate M&A targets. For a major acquisition, integrating the business might require more resources.
  • Failure to maintain profitability for recently turned around businesses, as SMG might overspend on expansions.
  • Competition from other integrated and specialised players. They could take away SMG’s patients and specialist doctors

John Cheong CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-11-29
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 0.780 Same 0.780