SINGAPORE (Apr 1): RHB is keeping its “buy” recommendation on TalkMed with a lowered target price of 53 cents from 62 cents previously.
With the ongoing travel restrictions in place due to the Covid-19 outbreak, TalkMed will be seeing a drop in the number of medical tourists, as international visitors are not allowed to enter Singapore for short-term trips.
This resulted in a halt of foreign medical tourism, especially those from Indonesia, which is the bulk of the group’s portfolio.
In a Wednesday report, analyst Jerick Seet says, “As a result, we factored in a drop in the number of medical tourists until the end of June 2020, which would result in a much weaker performance in 2020 for TalkMed.”
The analyst has lowered TalkMed’s FY20 PATMI by 14% and continue to monitor the way COVID-19 impacts TalkMed’s operations.
Nonetheless, TalkMed has a strong net cash balance sheet and an attractive dividend yield of about 4%.
Before the COVID19 crisis began, the earnings recovery for TalkMed was underway as it is understood that CEO Dr Ang’s utilisation increased significantly y-o-y.
“We estimate the Covid-19 pandemic to stop by the end of June 2020. Until then, we assess that the company’s net cash balance sheet and its solid positive operating cashflow should help buffer this crisis,” says Seet.
Meanwhile, Seet also expects that the management will continue to reward the company shareholders. “For FY19, the dividend payout ratio was 84.5% and we expect this ratio to remain unchanged, which would result in about 4% yield in FY20,” he adds.
On the other hand, the group’s management believes that there is a high potential for mesenchymal stem cells (MSCs) based therapies, which are currently used overseas in regenerative medicine and therapy, for aesthetic as well as other purposes.
TalkMed’s 60%-owned subsidiary Stem Med, has embarked on a research and clinical programme for the use of MSCs-based therapies in the region. But, a cellular therapy in Singapore can only be approved under the auspices of clinical trials. As such, Seet notes that monetisation of such therapies in Singapore, would only be possible after regulations are changed.
As at 10.55am, shares in TalkMed are trading at 43 cents or 6.3 times FY20 book with a dividend yield of 4.0%.
