SINGAPORE (July 8): KGI Securities has initiated coverage on Singapore Medical Group (SMG) with an “outperform” call and target price of 34 cents, which represents a total upside of 39.0%, including a forecasted dividend yield of 1.4% for FY21F.
“We assigned a fair, given the limited downside risks, but conservative 11x FY21F P/E based on its 1-year historical average and more than 30% discount to its peer averages, as we remain cautious about the extent of impact of Covid-19 on the Group’s performance, in Singapore and overseas,” says analyst Amirah Yusoff in a Wednesday report.
Yusoff has forecasted profit after tax and minority interests (PATMI) for SMG in 2020F to come in at $11 million, with forecasted earnings per share of 2.33 cents.
In Singapore, SMG continues to gain traction as a leading healthcare provider with four main pillars, Aesthetics, Diagnostic Imaging & Screening, Oncology, and Women’s and Children’s Health.
“While its focus remains on the women’s and children healthcare vertical, it has also successfully diversified its revenue streams into segments such as Dental, Diagnostics, and Ophthalmology,” says Yusoff.
“With a diverse network of specialist healthcare services in key locations such as Paragon, Punggol and Bishan, we think that the Group’s ability to promote cross-selling opportunities among its segments are enhanced and will be a catalyst for organic growth locally,” she adds.
In the region, Yusoff sees SMG’s expansion into Indonesia and Vietnam as “spot on”, as both countries now have a booming middle class, a relatively young population, and strong economic growth, that will continue to boost demand for private healthcare and non-essential services.
In Australia, supportive government policies and disposable income means fertility treatments will be well sought-after. Infertility is said to affect about 1 in every 6 Australian couples of reproductive age according to Health Direct Australia.
“SMG has been aggressive and will continue to be aggressive in expanding its footprint across Asia-Pacific through various joint ventures (JV) and associates; with Asia-Pacific’s developing healthcare landscape expanding at a rate almost double that of the rest of the world over the next decade, we believe that SMG is primed and positioned for success,” says Yusoff.
The group is also poised to become a part of the largest fertility and women’s health platform in Asia Pacific through its partnership with CHA Healthcare Singapore, its largest shareholder and partner. CHA Healthcare Singapore is an international subsidiary of leading Korean healthcare group CHA Health Systems.
Shares in Singapore Medical Group closed 1.5 cents higher, or 6,3% up, at 25.5 cents on Wednesday.
