SINGAPORE (Mar 1): RHB is keeping Singapore Medical Group (SMG) on “buy” with a higher target price of 65 cents, from 59 cents previously, on the back of its expanding war chest.
The healthcare services provider staged a turnaround in the full year ended Dec 31, swinging back into profitability with record earnings of $2.4 million on higher revenue.
Revenue in FY2016 rose 34.3% on-year to $41.6 million, mainly driven by contributions from the healthcare segment, which grew 35% to $29.9 million.
(See: Singapore Medical Group swings around with record FY16 earnings of $2.4 mil)
“Going forward, we expect SMG to continue to enjoy improved margins from a higher patient load, with earnings to kick in from the Astra Group acquisition,” says RHB analyst Jarick Seet in a Wednesday report.
SMG in Oct 2016 had announced the acquisition of six obstetrics and gynaecology clinics under the Astra Women Specialists group of clinics for $60 million.
SMG is also tying up with Korean healthcare group CHA Medical Group, which will be taking a 8.8% stake in SMG by subscribing for 30 million new shares in the company.
(See: Singapore Medical Group could re-rate following Korean tie-up)
“SMG is well positioned for its next phase of growth as a pan-Asian specialist healthcare provider,” Seet says. “With a war chest of over $20 million going forward, we expect SMG to also make more accretive acquisitions in the near term, hastening its growth.”
In addition, Seet expects organic growth in SMG’s health and imaging diagnostic segments to remain strong.
As at 11.14am, shares of Singapore Medical Group are trading half a cent higher at 59 cents.
