Clearbridge Health Limited - Phillip Securities 2020-08-31: Revenue Tripled In 1H20

CLEARBRIDGE HEALTH LIMITED (SGX:1H3)

Clearbridge Health Limited - Revenue Tripled In 1H20

Clearbridge Health (SGX:1H3)'s 1H20 revenue and EBITDA were within our expectation. 1H20 revenue more than tripled to S$21.4mn and EBITDAR was a positive S$3.6mn. Operating cash-flow was $4.5mn in 1H20, a turnaround from the negative S$3.6mn in 1H19.
Growth in 1H20 was driven by the acquisition of nine Singapore dental clinics in August 2019 and distribution of Biolidics (SGX:8YY) COVID-19 Antibody Test Kits.
Maintain BUY on Clearbridge Health with an unchanged target price of S$0.26.

We expect a stronger recovery in 2H20 for Clearbridge Health. Almost all business segments suffered lower patient load in 1H20 due to the lockdown. Only renal care operations in Indonesia (i.e. TMJ) fared better as the daily dialysis treatment is essential for patients. The ability of Clearbridge Health to widely and rapidly distribute the new test kit across their medical network in SE Asia was a positive surprise and represents a new growth opportunity for future products.

Clearbridge Health's 1H20 revenue was supported by the acquisition of Dental Focus Group’s nine dental clinics in Singapore and distribution of Biolidics COVID-19 Antibody Test Kits. It was not disclosed the sales contribution from sales kit. However, we expect it to be significant because Biolidics sold S$6.3mn Antibody Test Kits in 1H20.

In 1H20, operating cash-flow generated was S$4.5mn, a major turnaround from the negative S$3.6mn a year ago. In addition to the increased profitability, working capital improved due to lower receivables from the public sector for the Indonesian operations.

Despite revenue tripling in 1H20, employee expenses only increased by 14% y-o-y. Distribution of the test kits tapped on the existing marketing team or network. The acquisition of dental clinics only incorporated nurses and back-end staff.

Several businesses were hit by the pandemic. IGM Labs operates 15 clinical laboratories in Indonesia, it faced weaker traffic as the patient admission in hospitals declined due to movement restrictions. Revenue in Singapore from dental and aesthetics was similarly weak due to lower patient load following the lockdown.

We expect all divisions to experience stronger performance in 2H20.
1. Indonesia: As lockdown eases, patient traffic in the hospitals can recover from devastating 2Q20, improving lab test activities for IGM Labs. TMJ revenue will remain stable and largely unaffected by the pandemic due to the need for patients to undergo daily hemodialysis treatment. With 23 facilities in operation and another 13 more pending permit or under renovation, growth will remain robust for TMJ.
2. Philippines: There was a 14 days voluntary closure of the medical centre in July due to a COVID-19 infection amongst patients and staff. Operations have since resumed. Growth for the Philippines will be driven by COVID-19 related services.
3. Hong Kong: The lockdown was negative for Hong Kong clinics as patient load from mainland China was adversely affected. The clinic has refocused its efforts on domestic patients and added another role as a gateway to source new products from China.
4. Singapore: Based on industry data, the lockdown has severely curtailed patients into dental clinics and aesthetics. We expect a recovery and pent-up demand as the lockdown eases. The dental business will benefit from having a larger presence in the heartlands, which provides greater convenience for patients.

Maintain BUY on Clearbridge Health with a target price of S$0.26.
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Clearbridge Health continues to expand and leverage its network of medical centres throughout ASEAN. The stronger operating cash-flow and balance sheet will allow Clearbridge Health to -
1. further grow via acquisition;
2. expand their Indonesian operations faster where the capital expenditure and working capital requirements are much higher.

Phillip Research Team Phillip Securities Research | https://www.stocksbnb.com/ 2020-08-31

SGX Stock Analyst Report BUY MAINTAIN BUY 0.260 SAME 0.260