SINGAPORE (July 11): UOB Kay Hian is starting Asian Healthcare Specialists (AHS) at “buy” with a target price of 33 cents as it views the stock as a proxy to increased medical spending from Singapore’s ageing population and rising participation in sports.
In an initiation report on Wednesday, analyst Yeo Hai Wei says he sees FY19 as the start of a multi-year growth story for AHS as the group scales up to capture a bigger share of the market.
“Orthopaedic disorders are typically associated with old age and Singapore’s well-insured ageing population is supporting the development of this burgeoning industry. AHS is well-positioned to tap the surge in demand for orthopaedic services and serves as a proxy to ride on the industry’s growth story,” he explains.
Yeo likes the stock for its robust balance sheet with zero debt and low capex requirements, which he believes signals the potential for higher dividends. Noting that the group intends to pay out no less than 50% of net profit attributable to shareholders for FY18 and FY19, UOB is estimating a dividend yield of 3.5% in FY19.
He also highlights the group’s advanced techniques and technologies to perform complex revision surgery as a means of minimal or singular competition for certain product offerings. The ROBODOC system is one such example, with AHS being one of only two users of the system and the sole practitioner within the private healthcare landscape.
Further, Yeo views AHS’ congregation of sub-specialty senior specialists as a “closed-loop of complementary services” – while public seminars attended by specialists serve to market AHS’ positioning and heighten its visibility, presenting the group with acquisition and partnership opportunities as it expands its complementary product offerings.
“AHS’ founders are well-incentivised with clear alignment with shareholder interest, enabling AHS to scale up aggressively while keeping in mind minority shareholders’ interest,” concludes the analyst.
As at 10.47am, shares in AHS are trading 1 cent higher at 25 cents or 4.7 times FY19F book.
