SINGAPORE (Feb 28): RHB is starting coverage of private oncology specialist TalkMed with a “buy” on substantially lower projected FY17 losses at its associates, higher share liquidity and expectations of expansion via acquisitions.
In 2015, TalkMed partnered with TE Asia Healthcare Partners to open Hong Kong Integrated Oncology Centre and Integrated Imaging & Endoscopy Diagnostic Centre (HKIEDC), of which it owns 30%. The partners followed this up with the implementation of several initiatives to ramp up patient load.
In a Tuesday report, analyst Jarick Seet expects losses at its associates to reduce to $2 million from $5 million in 2017, before turning around with an estimated $1.5 million profit in 2018.
With the signing of the consultancy agreement with Parkway Hospital Singapore, Talkmed is now able to leverage on the vast network of the Parkway Cancer Centre (PCC) through its patient base, utilising top-notch facilities and infrastructure while saving on marketing and advertising initiatives. The contract was renewed in Oct 2016, extending it to 2021.
Although Talkmed has kept a low profile over the past few years, Seet believes management is now keen on meeting up with analysts and institutional fund managers.
“With a war chest of $50 million and a net cash position, it would also likely acquire private clinics locally, either in existing medical fields or expand into new medical areas,” says Seet and initiatives such as its proposed 1-for-1 bonus issue should improve the stock’s liquidity.
To be sure, Talkmed is a top private oncology player led by renowned Dr Ang Peng Tiam, who has over 30 years of experience in the field. Currently, TalkMed has 13 doctors at eight clinics across several prominent private hospitals in Singapore.
“With a track record of paying out more than 80% of its earnings as dividends over the past few years, coupled with several key initiatives to grow its business both organically and inorganically, we believe TalkMed is grossly undervalued currently,” says Seet. Key risks include high dependency on key management personnel, and an unfavourable verdict from a disciplinary tribunal appeal involving Dr Ang, adds the analyst.
Shares of Talkmed are up 6 cents at $1.49.
