This is the fifth year since the present management, in Dec 2013, took over Singapore Medical Group (SMG), and transformed it massively.

drbengteckliang8.16Dr Beng Teck Liang was appointed CEO of Singapore Medical Group in Dec 2013 while Mr Tony Tan was appointed non-executive chairman at the same time.
NextInsight file photo.
The numbers say it all: For the full year of 2013, SMG reported revenue of $22.9 million and a net loss of $6.4 million.

Its market cap, based on the stock price of 11 cents as at end-2013, was $16 million, a pitiful micro-cap.

Through organic and inorganic growth, SMG currently has a market cap of $204 million (stock price: 42 cents) and a share capital which is about 3.3X larger. 

1H18 revenue came in at $40.8 million (+33% y-o-y) while net profit, $6.9 million (+70% y-o-y), for this leading specialist provider of women’s health and wellness care in Singapore.


So, SMG's stock price has surged 4x in nearly 5 years, from 11 cents to 42 cents.

Still, it is, arguably, the cheapest medical stock on the Singapore Exchange currently, as the table shows:  

SMG: Trading at a discount on every valuation metric

SGX Listed

P/E

Forward P/E

P /B

Forward P/B

Forward EV/EBITDA

HMI

25.5

21.6

6.4

6.5

14.0

Raffles Medical

27.1

33.0

2.6

2.5

21.1

IHH Healthcare

--

42.0

--

2.0

19.5

Q&M Dental

16.9

22.6

3.5

3.3

-

ISEC

18.5

--

2.3

--

--

SOG

16.0

--

3.9

--

--

Talkmed

32.0

33.0

11.1

11.0

22.1

Average

22.7

30.5

5.0

5.1

19.2

SMG

21.0

14.2

1.8

1.5

9.3


If there's a quantitative metric for dynamism and ambition, SMG would score well too. 

 

It has regularly articulated its vision for its growth in Singapore and, particularly, in Vietnam and Indonesia.

 

You can get a good idea of all this in section 10 of its 2Q18 financial results announcement.

 

And check out also our article of just three months ago: 


Notably, the overseas ventures are moving out of gestation phases and growing into profitability.

For 1H2018, SMG's share of profit of joint ventures and associate was S$3,000 compared to a share of loss of S$162,000 for 1H2017.
 

Where Singapore Medical Group’s practices are located:

Paragon Medical Centre, Mount Elizabeth Medical Center, Mount Elizabeth Novena Specialist Centre, Novena Medical Center, OUE Downtown Gallery, Gleneagles Medical Centre, Farrer Park Medical Centre @ Connexion, Mount Alvernia Hospital and other locations in Bishan, Hougang, Jurong, Toa Payoh, and Tiong Bahru.

Presumably, SMG stock will get re-rated as its earnings grow, especially its overseas ventures where the growth potential is vast.

It would also help if it moves from a Catalist listing to the Mainboard, and starts paying dividends to shareholders.

On the latter subject, for the first time, SMG said in its 2Q18 results announcement that it is considering "implementing a formal dividend policy in FY2019."

SMG had about $20 million in short-term and long-term borrowings as at end-June 2018, which it could be prioritising to pare down before embarking on a dividend policy.  

UOB Kay Hian says:

• Maintain BUY with an unchanged PE-based target price of S$0.74 pegged to revised peer’s average 2018F PE of 25.5.

SMG’s FY18F PE of 14.9x looks inexpensive against its 3-year EPS CAGR of 28.7%, which is the highest in the asset light healthcare groups.

We think its discount is unwarranted given its solid execution and regional platform to further expand into attractive markets such as Vietnam and Indonesia.

Full report here.


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