SINGAPORE (May 16): RHB Research says Singapore Medical Group must be doing something right to capture market share in the private medical practice space from its competitors.
In addition, SW1, the aesthetic and plastic surgery clinic that was acquired at the end of March, is already profitable and is expected to contribute positively to the group’s bottomline from 2Q18.
RHB Research expects steady quarters ahead with organic growth still strong at double-digit levels despite an estimated drop in medical tourism numbers.
“As a result, we are expecting better quarters ahead for Singapore Medical Group for the rest of 2018. Maintain ‘buy’ with an unchanged target price of 68 cents,” says lead analyst Jarick Seet in a Tuesday report.
To recap, Singapore Medical Group reported a solid 1Q18 with topline growing 37% y-o-y to $19.23 million and PATMI surging 138.9% to $3.41 million as acquisition earnings kicked in.
See: Singapore Medical Group reports more than doubling of 1Q earnings to $3.4 mil on topline growth
Topline growth was largely driven by the healthcare segment, which grew 47.7% y-o-y to $14.3 million. The diagnostic & aesthetics segment rose 14.2% y-o-y to $4.9 million.
But the strong 1Q18 earnings did not include its 85% stake in SW1, an aesthetic and plastic surgery clinic that was acquired at the end of March and is already profitable.
“We also understand that past acquisitions that were completed are still enjoying double-digit growth y-o-y. As a result, we are projecting better quarters ahead for the rest of 2018,” saysa Seet.
After its rights issue earlier this year, SMG has replenished its war chest for more acquisitions. However, management revealed that the group will likely pursue smaller sized acquisitions in the range of $5-10 million going forward, and would not raise any more funds for the rest of the year.
Although its Vietnam operations lost $800,000 last year, management is expecting the operations there to breakeven by the end of 2018.
Management is optimistic about growth in Australia, especially in the in vitro fertilisation (IVF) space and is open to more acquisitions in the future.
As at 12.51pm, shares in Singapore Medical Group are trading at 50 cents or 16.7 times FY18 forecast earnings.
