SINGAPORE (June 29): RHB is maintaining its “buy” call on TalkMed Group with a lower target price of 73 cents from $1.03 previously following Wednesday’s news of the eight-month suspension of its CEO, Dr Ang Peng Tiam, starting from July 25.
(See: TalkMed CEO Ang Peng Tiam handed 8-month suspension for professional misconduct in 2010)
While steps to minimise the disruption have been taken with the oncologist’s current patient cases being handed to other senior doctors in the company, RHB expects the incident to negatively impact TalkMed’s earnings, as Ang serves as a key contributor the group’s profitability.
As a result of the suspension, the research house has lowered its FY17-18F earnings forecasts for the group by 18-15% respectively.
“We think that this suspension is a short term roadblock in the group’s long term future as it would likely have a temporary impact to the group’s profitability… We remain confident of Talkmed’s prospects and expect it to be resilient despite the weakening outlook of foreign medical tourists in Singapore,” says analyst Jarick Seet in a Thursday report.
On the bright side, Seet believes Ang’s suspension would free up the oncologist’s time, thus allowing him to re-think the group’s future direction and firm up any merger and acquisition (M&A) opportunities currently in the works – which would make up for any loss of revenue during the eight-month suspension period.
Noting that TalkMed has a war chest of over $70 million and a net position, the analyst thinks the group is likely to acquire private clinics locally either in the existing medical field, or in new medical areas.
“[The suspension] would also enable Dr Ang to finally meet with potential institutional investors as well,” he adds.
As at 11.59am, shares of TalkMed are trading 4 cents higher at 68 cents.
