Singapore Medical Group (SMG SP) - Maybank Kim Eng 2018-05-15: A Good Start

Singapore Medical Group (SMG SP) - Maybank Kim Eng 2018-05-15: A Good Start SINGAPORE MEDICAL GROUP LTD SGX: 5OT

Singapore Medical Group (SMG SP) - A Good Start

Results in line, expect continued growth momentum

  • Singapore Medical Group (SMG)'s 1Q18 core earnings were in line, meeting 26-27% of ours and consensus FY18E. Its 139% core earnings growth was driven by both key segments, where revenue for healthcare and diagnostic & aesthetics segment grew 48% and 14% y-o-y, thanks to its inorganic and organic initiatives. 
  • We expect SMG to maintain its growth momentum through:
    1. organic expansion, via two of its new diagnostic centres opened in 1Q18 and recruitment of more specialists;
    2. acquisition of SW1 Clinic, completed in Apr 2018; and
    3. growing its overseas business in Jakarta, Vietnam and Australia.
  • Maintain BUY and Target Price of SGD0.70, based on 27x FY18E EPS (avg of 2-year forward mean of small-cap healthcare peers in Singapore).

Multiple organic growth initiatives

  • Singapore Medical Group (SMG) targets to ramp up two of its new diagnostic centres opened in 1Q18 and recruit more specialists. There is ample capacity for its Novena diagnostic centre, which is at a 50% utilisation rate as of 1Q18. 
  • In addition, it has started its cardiology practice with the opening of two new clinics and it targets to hire more radiologists in 3Q18.

Expect further contributions from acquisitions

  • Company completed the acquisition of SW1 Clinic in Apr 2018. To recap, it is a renowned aesthetic, plastic surgery and medical spa/clinic in Singapore and we expect further M&A contributions from SW1 Clinic. The aesthetic group, which focuses on the premium segment, continues to receive healthy patient demand. 
  • Singapore Medical Group (SMG) continues to explore more M&A opportunities in Singapore to further scale up.

Overseas business progressing well

  • Singapore Medical Group (SMG)’s eye clinic in Jakarta achieved profitability in 1Q18. 
  • On the other hand, the two Vietnam clinics continued its ramp up phase. SMG has started a paediatric team of six specialists to spearhead growth initiatives at its clinics in Vietnam.

Swing Factors 


  • Increasing discovery could lead to a rerating of the shares. 
  • More M&A: we have not factored in any future acquisitions. Every SGD1m profit acquisition could raise FY7E EPS and Target Price 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 | https://www.maybank-ke.com.sg/ 2018-05-15
SGX Stock Analyst Report BUY Maintain BUY 0.700 Same 0.700