SINGAPORE (Aug 11): DBS is staying positive on Singapore O&G’s medium-term growth potential but the research house is cautious on the near-term potential headwinds.
This follows lower earnings recorded in 1H17 and potential increase in cost from the gestation period in ramping-up paediatrics division.
“We downgrade our rating to ‘fully valued’ on a lower target price of $0.41 from $0.80,” says lead analyst Rachel Tan.
In 1H17, net profit fell 6% y-o-y to $4 million; 40% of DBS’ FY17 estimates. The lower earnings were impacted by muted revenue growth of only 2% y-o-y to $14 million led by lower revenue from dermatology division while O&G division recorded modest growth, coupled with higher expenses mainly from higher staff cost.
See: Singapore O&G 1H earnings fall 6.4% to $4.1 mil
Key positive takeaways from the 1H17 results include improvement in market share of births on a weak national number and positive growth momentum in cancer division. Key negatives include fall of contributions from dermatology and deterioration of EBIT margin.
Potential upside risks and re-rating catalysts are better-than-expected ramp-up from its cancer and paediatrics divisions, recovery in the dermatology division, and expansion into a potential new growth pillar including IVF, child care and imaging.
Shares in Singapore O&G are down 1 cent at 48 cents.
