SINGAPORE (Nov 16): Maybank Kim Eng is maintaining its “buy” call on Health Management International (HMI) with a target price of 80 cents, after the group’s 1Q18 core earnings came in line with expectations to make up 27% of the research house’s FY18E projections.
See: Health Management 1Q earnings more than double
In a Tuesday report, analyst John Cheong says he continues to like the stock for its sustainable mid-teens earnings growth, driven by a unique independent operating model.
Operational growth remains healthy based on the group’s 1Q performance with increased revenue, gross profit and patient load, observes the analyst, while HMI also remains on track for its expansion plans with regards to both Mahkota and Regency.
HMI also recently announced it had established a strategic share placement agreement with Temasek subsidiary Heliconia, which Cheong considers a plus to HMI given how an anticipated $11 million worth of net proceeds will be used for inorganic expansion.
“HMI could tap into Heliconia’s network and resources for more inorganic leads. The dilution impact from the share placement will be offset by the increase in cash balances, which is accounted for in our DCF valuation,” notes the analyst.
As at 10.34am, shares in HMI are trading flat at 68 cents, or 25.3 times core FY19E P/E.
