SINGAPORE (Jan 26): Singapore Medical Group now has the largest healthcare platform catering to the premium market segment.
The group has transformed into a premier healthcare platform that aims to capture a premium audience for its ecosystem which will serve patients from cradle to grave, says UOB Kay Hian in an initiation report out on Friday.
As a proxy to emerging markets and a platform spanning a wide range of medical specialties, UOB expects 2018 to be a year to remember as SMG reaps the fruits of acute deals made in prior years.
"Initiate with 'buy' on this high-growth medical platform gem with a street-high target price of 83 cents," says analyst Nicholas Leow in a Friday report for retail investors.
Leow says SMG's ability to retain an elite audience capable of paying higher prices that demand a premium level of service, targeting M&A deals in the forefront of medical technology and a platform that encompasses a wide range of medical specialties from cradle to grave, make it "a winner in this lucrative space".
The group is also trading at undemanding valuations of 20.7 times 2018 earnings with a forecast three-year EPS CAGR of 68% from 2016-2019.
"This implies a PEG of 0.3x, which we deem compelling," says Leow.
At present, SMG has more than 27 clinics located across Singapore and a regional presence across Indonesia and Vietnam. The group is exploring acquisitions or partnerships in the forefront of medical technology which could lead to increased offerings to a demanding luxury audience.
SMG first acquired a 38.1% stake in Lifescan in July 15 when it was a loss-making entity. Through good management and extracting of synergies with its other existing core specialties and medical network, SMG was able to turn it around and achieve profitability within the year.
From 2016-17, SMG has embarked on a series of earnings accretive acquisitions at undemanding valuations. This should give investors comfort that barring exceptional circumstances, management will be prudent in making future acquisitions.
As SMG’s platform started taking shape from 2015-17, many healthcare practitioners with different specialties have joined its growing platform.
In 2016 and 2017, the group added medical practitioners in the lucrative oncology, pediatrics and obstetrics and gynaecology (O&G) specialties.
Meanwhile, SMG has no single doctor accounting for a large percentage of sales, says Leow.
"Medical practitioners are well incentivised with a clear alignment with shareholder interest making it a platform with the ability to scale aggressively while having minority shareholder interest at heart."
As at 12.59pm, shares in SMG are trading at 63 cents.
