Singapore Medical Group - RHB Invest 2020-02-25: Steady 4Q19 But Clouded By Short-term Uncertainty


Singapore Medical Group - Steady 4Q19 But Clouded By Short-term Uncertainty

  • Maintain NEUTRAL with a P/E-derived Target Price of SGD0.35, from SGD0.36, offering a 9.4% upside and c.3% yield.
  • Singapore Medical Group (SGX:5OT)'s 4QFY19 revenue grew 16.5% y-o-y to SGD 25.9m on the back of an organic growth. FY19 revenue grew 11.3% y-o-y and hit a record SGD94.7m, driven by growth across Health and Diagnostic & Aesthetics (“D&A”) segments.
  • Full-year PATMI of SGD13.7m, was up 5.7% y-o-y, exceeding our forecast by 5.8%. As such, we lift our earnings by 5-6% for FY20F-22F.

PATMI of SGD13.7m, up 5.7% y-o-y

  • PATMI of SGD13.7m, up 5.7% y-o-y was higher than our forecast of SGD12.9m, on the back of a stronger revenue growth.
  • Singapore Medical Group's full-year revenue rose 11.3% y-o-y to a record of SGD94.7m was a result of higher revenue in the D&A segment (contributed by Pheniks which was acquired in Apr 2018), and the Health segment (organic growth in existing clinics offset by the closure of the Orthopaedic clinic).

COVID-19 is not necessary positive for the medical businesses

  • COVID-19 is not necessary positive for the medical businesses as we believe it brought a more negative overall impact to medical firms in Singapore. In addition to a drop in medical tourism, local patients may choose to defer or even cancel their visits to doctors, for non-urgent cases, in view of the current situation. Hence, we expect COVID-19 to bring some damage to the group business in 1QFY20, especially in D&A.

Maiden final dividend of 0.8 cents

  • Singapore Medical Group declared its maiden final dividend of 0.8 cents, representing a dividend payout ratio of 28.3%, higher than our forecasted DPS of 0.53 cents.
  • Simultaneously, Singapore Medical Group announced a formal dividend policy of dividends amounting no less than 20% of the group’s core earnings. With a steady cash flow of more than SGD20m a year, coupled with a growing bottom-line, we think a dividend per share of 0.8 cents is sustainable.

Opportunities amid uncertainty.

  • Singapore Medical Group will continue its organic growth plan by adding 8-10 specialist this year as well as focusing on its overseas growth plan ie in Vietnam, Indonesia and Australia. Management thinks that there could be some opportunities arising during this period of uncertainty.
  • With net cash of SGD5.1m and a healthy debt/equity ratio of 15.3%, the group has the capacity to also expand through aquisitions.

Maintain NEUTRAL

Jarick Seet RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-02-25
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