TalkMed Group - RHB Invest 2020-02-19: Supported By Good Dividends; Maintain BUY

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TALKMED GROUP LIMITED (SGX:5G3)

TalkMed Group - Supported By Good Dividends; Maintain BUY

• TalkMed (SGX:5G3)’s 4Q19 results exceeded our expectations, with topline and PATMI up by 16.6% y-o-y and 18.9% y-o-y. This was mainly due to the return of its key contributor and CEO, Dr Ang Peng Tiam.
• Going forward, revenue and earnings should continue improving, while Dr Ang’s contribution should also recover back to levels prior to his suspension.
• Maintain BUY, SGD0.62 Target Price, 19% upside with 4.5% FY20F yield.

DPS rises to SGD0.023 for FY19.

• With the recovery in earnings, we expect management to continue rewarding shareholders, like it has done in the past.
• FY19 DPS amounted to SGD0.023, which includes its interim dividend (FY18 DPS: SGD0.0183 in FY18, +25.6% y-o-y). See TalkMed Dividend History. This reflects an 84.5% payout ratio for FY19. We believe it should be able to maintain this ratio, looking ahead. 

Huge potential in mesenchymal stem cells (MSCs).

• MSCs are currently used in regenerative medicine and therapy overseas, for aesthetic as well as other purposes. Management believes that there is great potential in this area. Its 60%-owned subsidiary, Stem Med Pte Ltd (Stem Med), has embarked on a research and clinical programme for MSC use in the region.
• However, we understand that, in Singapore, cellular therapy can only be approved under the auspices of clinical trials. As such, the main monetisation of these therapies in Singapore would likely only come when regulations are altered.

Attractive dividends; maintain BUY.

• TalkMed (SGX:5G3)’s earnings have continued to recover, as seen by its results, and we believe Dr Ang’s utilisation rate has also spiked up significantly. As he is a key net profit contributor, we expect earnings and net margins to continue improving.
• Dividends should also remain attractive, with a payout ratio of 4.5% of earnings in FY20F. Note that the company typically forks out 80-90% of its PATMI as dividends. As such, we maintain our BUY call, with an unchanged DCF-based Target Price of SGD0.62.
• See TalkMed Share Price; TalkMed Target Price; TalkMed Analyst Reports; TalkMed Dividend History; TalkMed Announcements; TalkMed Latest News. 
• Key downside risks include the non-renewal of its consultancy restatement agreement.

Jarick Seet RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-02-19

SGX Stock Analyst Report BUY MAINTAIN BUY 0.620 SAME 0.620