Singapore Medical Group - UOB Kay Hian 2021-08-04: 1H21 Record Revenue Amid Challenges; Poised For Growth


Singapore Medical Group - 1H21 Record Revenue Amid Challenges; Poised For Growth

  • Singapore Medical Group reported a record 1H21 revenue while earnings continued to be impressive at S$7.2m (+108% y-o-y), in line with expectations. Aesthetics and diagnostics services continue to spur earnings even with challenges faced from Phase 2 (Heightened Alert) as well as COVID-19 restrictions for overseas businesses in Indonesia and Vietnam.
  • Overall, demand proved to be resilient and we look forward to the return of medical tourists. Maintain BUY on Singapore Medical Group with an unchanged P/E-based target price of S$0.48.

Singapore Medical Group (SMG)'s results in line with record-high revenue.

  • Singapore Medical Group (SGX:5OT) reported 1H21 net profit of S$7.2m (+108% y-o-y) from a low base. This forms 52% of our full-year estimate, in line with expectations. 1H21 revenue of S$49.7m was a record high (+28% y-o-y), and showed an improvement with an 11% increase from 1H19’s pre-COVID-19 levels.

Steady demand in healthcare services.

  • 2Q21 showed resilience in revenue contribution, (+0.3% q-o-q) despite the Phase 2 (Heightened Alert) measures. The increase in demand on a y-o-y basis was due to a rise in demand as compared to 1H20’s operations which were curtailed by circuit breaker measures.
  • Singapore Medical Group’s Diagnostics & Aesthetics services revenue rose 77% y-o-y while the group’s health segment recorded a top-line growth of 9% y-o-y. Domestic demand for diagnostics and aesthetics services continues to be strong amid higher medical expenditure and a recovery of healthcare services.
  • In the longer term, a reopening of borders may potentially impact the private healthcare industry as domestic discretionary consumer spending slows and shifts overseas. However, management notes that there will likely be some customer stickiness with healthcare services, which allows for some sustained demand.

Net margins at a healthy level.

Net cash position.

  • Singapore Medical Group’s net cash position amounted to S$18.5m and its core business continues to generate strong positive operating cash flows of S$9.8m.


Some challenges overseas.

  • Two of Singapore Medical Group’s overseas entities, CityClinic Asia Investments in Vietnam and PT Ciputra SMG in Indonesia have been affected by COVID-19 cases and lockdowns within both countries. Challenging conditions are expected to persist in the near term as the countries grapple with the pandemic. A silver lining would be that the group is supporting COVID-19 testing in Vietnam.

Inorganic and organic growth.

  • Singapore Medical Group’s partnership with CHA Healthcare and City Fertility, one of Australia’s largest IVF & fertility service groups has continued to gain traction and the group is in the final stages of closing an earnings accretive acquisition which will expand its footprint in Western Australia. Singapore Medical Group’s investment stake in Australia is approximately 13%.
  • On the organic front, Singapore Medical Group is looking to add new O&G specialists and paediatricians in addition to the opening of new clinics, though hiring employees is challenging due to the uncertainties arising from COVID-19. The group has a network of 14 specialist clinics across the heartlands.

Awaiting a boost from medical tourism.

  • Foreign patients historically contribute about 15-20% of Singapore Medical Group’s revenue and continue to weigh on the group’s operations. We believe that a recovery of the group’s medical tourists will be a key factor for the group’s growth, due to the higher billing intensity of medical tourists. With increasing vaccination rates, the reopening of borders appears to be an imminent prospect and a likely positive for the group.


  • None.


  • Maintain BUY on Singapore Medical Group with an unchanged P/E-based target price of S$0.48, pegged to peers’ average P/E of 17x of 2021F P/E.

Resilient and poised for growth.


  • Recovery in foreign patient load.
  • Earnings-accretive M&A.
  • Stronger traction in high-growth markets such as Vietnam.

Lucas Teng UOB Kay Hian Research | 2021-08-04
SGX Stock Analyst Report BUY MAINTAIN BUY 0.460 SAME 0.460