Excerpts from RHB report

Analysts: Lee Cai Ling & Jarick Seet

Singapore Medical Group: Buy On Dips; Upgrade To BUY

S'pore Medical Group

Share price:
38 c

48 c

♦ Upgrade to BUY from Neutral, with unchanged DCF-based TP of SGD0.48, 26% upside. SMG’s share price 10 May.

The stock is currently trading at 14x P/E, a discount to its peer average of 23x P/E. We think that it is a good level to accumulate.

CHA Healthcare paid an average of SGD0.549/share. Singapore Medical Group first issued 30m shares via private placement to CHA Healthcare in Feb 2017 at SGD0.50/share, and subsequently, CHA subscribed to 3m rights shares at SGD0.48/share.

drbengteckleng3.18Dr Beng Teck Liang, CEO of Singapore Medical Group. NextInsight file photoIn Feb 2019, CHA increased its stake to 24.13% (from 6.87%) by purchasing 83m shares from SMG’s existing shareholders (including management) at SGD0.605/share.

CHA is also providing a SGD10m convertible loan at a conversion price of SGD0.423/share. About 80% of the loan has been earmarked for M&A activities. If the bond is converted, CHA stands to own 27.69% stake in SMG.

Near term profitability should be impacted by aggressive growth plan. In 1Q19, the group opened the O&G and paediatrics clinic in Punggol, and its second aesthetic clinic SW1 in downtown Singapore.

SMG also recently opened a breast care clinic last month. Regionally, it has expanded SW1 into Vietnam, and should take a new clinic 2-3 years to breakeven. The group intends to on-board 10-12 specialists this year, and new specialists may take time to ramp up their practice to full capacity.

Share price 1-year return of over 20%. The stock slipped 15% since 10 May with a 1-year return of -22.4%. Share price fell due to recent market sentiment, coupled with SMG’s higher operating cost as a result of its ongoing expansion plan.

Another overhang could be the price disparity between the conversion price (at SGD 0.423/share) of the convertible loan, and the sale of vendor shares (at SGD0.605/share), which may have raised some concerns as to the minority shareholders’ interests. The stock is currently trading at 14x P/E, a discount to peer average of c.23x P/E.

We upgrade to BUY from Neutral, with an unchanged DCF-based TP of SGD0.48, given the share price has fallen 15% from SGD0.445 to SGD0.38, at a 52 week low since 10 May.

FY19F P/E was trading at 16.8x compared to the current 14.4x. We think this is a good opportunity to buy on dips.

Full report here

Share Prices

Counter NameLastChange
AEM Holdings3.770-0.040
Avi-Tech Electronics0.2850.005
Best World1.8000.080
Broadway Ind0.117-
China Sunsine0.415-0.005
Food Empire0.635-0.005
Fortress Minerals0.315-
Geo Energy Res0.3600.005
Golden Energy0.770-0.010
GSS Energy0.0500.001
ISDN Holdings0.410-0.010
IX Biopharma0.1290.002
Jiutian Chemical0.0770.001
KSH Holdings0.355-
Leader Env0.056-
Medtecs Intl0.153-0.005
Meta Health0.024-0.001
Nordic Group0.4750.015
Oxley Holdings0.142-0.001
REX International0.230-
Sinostar PEC0.191-
Southern Alliance Mining0.405-
Straco Corp.0.405-
Sunpower Group0.260-0.005
The Trendlines0.093-
Totm Technologies0.115-0.002
UG Healthcare0.199-
Uni-Asia Group0.810-
Wilmar Intl4.050-
Yangzijiang Shipbldg1.4300.020

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1049 guests and no members online