Singapore Medical Group - UOB Kay Hian 2021-04-16: Fundamentals Remain Intact With Sustained Recovery In Patient Load


Singapore Medical Group - Fundamentals Remain Intact With Sustained Recovery In Patient Load

  • We are upbeat on Singapore Medical Group’s stellar growth prospects, in terms of organic clinic growth, expansion overseas and telehealth, which are underappreciated by the market.
  • Singapore Medical Group also announced that it will not be proceeding with a transaction of the group’s shares at this stage, though the group continues to explore various avenues to enhance shareholder value.
  • Maintain BUY with an unchanged PE-based target price of S$0.46.

Elective medical procedures remain on the high.

  • Medical services demand has remained relatively intact through the start of 2021. Private hospital admissions were robust in Feb 21 (+0.2% y-o-y, -2.8% m-o-m) which suggests that demand for elective medical procedures are still steady.
  • According to Singapore Medical Group (SGX:5OT)'s annual report, aesthetics, dental and health screening services saw pent-up demand in 2H20.

Still in growth mode.

  • Organic growth for the company continues to remain steadfast even with the effects of COVID-19. Singapore Medical Group’s recent initiatives includes the onboarding of a new IVF doctor in 3Q20, a new O&G doctor in 4Q20 and the opening of a new women’s health and paediatric clinic in the eastern region of Singapore in 4Q20.
  • In the past five years, Singapore Medical Group has grown from 29 clinics to the current count of 38 clinics.

Net cash position for expansion.

  • Singapore Medical Group has a net cash position of S$15.8m and it continues to explore overseas M&As opportunities. The group notes that current due diligence process is challenging amidst the impact from COVID-19.

No transaction.

  • Singapore Medical Group also announced that the group has decided not to proceed with further exploration of a transaction of the company’s shares at this stage. It continues to explore various avenues to enhance shareholder value, including possible corporate actions that can unlock value for shareholders.

Valuation is attractive.

  • While a transaction could have unlocked value for the group, we opine that Singapore Medical Group’s discounted market valuation is unwarranted given the recovery seen from domestic patient load. Singapore Medical Group trades at an attractive valuation with a proven track record of organic growth.

Growth plans under-appreciated by market.

  • In our view, Singapore Medical Group’s growth expansion into valuable overseas market such as Vietnam is unmatched by peers. Its aesthetics clinic in Vietnam taps into discretionary spending from the growing middle class and expatriate market.
  • Singapore Medical Group has also opened a third medical centre in the prime District 1 of Ho Chi Minh city, while continuing to grow its two 15,000 sf clinics in Ho Chi Minh city.

Telemedicine is also another aspect which the group has tapped onto.

  • Under Singapore Medical Group, HiDoc is a telemedicine platform which connects patients with their specialists. Telehealth saw a boost during the COVID-19 pandemic as more patients grew accustomed to seeking out their doctors online. According to the Integrated Health Information Systems (IHiS), Singapore’s national health IT agency, the number of cases in the telehealth programme has tripled in the six months post COVID-19.

Maintain BUY on Singapore Medical Group

Lucas Teng UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-04-16
SGX Stock Analyst Report BUY MAINTAIN BUY 0.460 SAME 0.460