SINGAPORE (April 17): UOB Kay Hian is maintaining a “buy” call on Singapore O&G with higher target price of $1.53 on expectations paediatrics service could start in 2H17.
SOG recently announced the incorporation of a new paediatrics subsidiary, SOG Children, whose principal activities include provision of general paediatrics and adolescent medicine services.
In an April 17 research note, analyst Thai Wei Ying expects the new division could be set up via organic expansion by recruitment or inorganic expansion through an acquisition.
“We view the expansion into paediatrics positively as it serves as a complementary and synergistic vertical offering to the group’s value chain, allowing for cross-selling and referrals,” says Thai.
Furthermore, SOG has a strong Obstetrics & Gynaecology department to feed patient referrals to paediatrics. As an indication, while 600 fewer babies were born in Singapore in 2016 than in the previous year, SOG was still able to record a 5.8% increase in deliveries to 1,728 babies.
This brings SOG’s market share in the private sector to 7.5% in 2016 from 6.7% in 2015 and 5.6% in 2014.
Thai is also seeing more diversification in deliveries among doctors although 29.44% shareholder Dr Heng Tung Lan continues to take up a sizeable amount of the delivery pool of 43-44%.
“For instance, Dr Natalie Chua has been ramping up her delivery load, which we estimate to constitute 16-17% of total deliveries.”
Meanwhile, UOB says the birth rate in Singapore is well supported by pro-birth initiatives undertaken by the government.
A good example is the cash incentives offer of up to $18,000 for parents with five children or more, on top of a generous 4-month/2-week maternity/paternity leave entitlement.
Furthermore, the Ministry of Manpower has introduced two funding schemes — WoW! And Flexi-Works! Funds — to encourage companies to implement work-life balance strategies at their workplace.
Shares of Singapore O&G are up 2 cents at $1.38.
