SINGAPORE (Oct 20): Maybank Kim Eng is maintaining its “buy” call on Singapore Medical Group with an unchanged target price of 78 cents which is pegged at 27 times FY18 earnings.
Maybank's rating follows SMG's recent acquisition of Babies and Children Specialist Clinic at Mount Alvernia Medical Centre for $7.9 million, which is to be funded by cash and shares to be issued at 62 cents each.
The consideration is based on 7.9 times FY16 earnings of $1 million.
The group also intends to hire four new medical specialists by 1Q18. These are a paediatrician, a senior O&G specialist and two cardiologists.
In a Friday report, analyst John Cheong highlights SMG’s two-pronged strategy of inorganic and organic growth, which he believes has the potential to ensure better long-term earnings sustainability for the group.
As such, Cheong has raised his FY19 EPS projection by 2% for earnings contribution from the acquisition while FY18 EPS remains unchanged due to operating costs for the four new specialists.
“With the addition of an interventionist and electrophysiologist by 1Q18, SMG is ready to start its specialty practice in cardiology. Management expects to cross-sell this segment with its health screening segment, as the cardiology segment requires a lot of screening procedures,” notes Cheong.
“Aside from the acquisition [of Babies and Children Specialist Clinic], [SMG] will be recruiting a new paediatrician by 1Q18 for a more balanced team and to drive long-term earnings sustainability,” he adds.
As at 11.20am, shares in SMG are trading flat at 62 cents.
