RHB analyst Jarick Seet has downgraded his call on medical oncology and stem cell services provider TalkMed to “hold” from his previous “buy” call.
His move comes as international medical tourists – which forms the bulk of TalkMed’s patients – takes a hit from the ongoing travel restrictions imposed to curb the spread of Covid-19 infections.
This caused a 23.2% plunge in its revenue to $14.1 million.
Overall, its earnings for 3Q2020 ended September came in at $5.2 million, down 39.2% from the $8.5 million logged in the previous year.
On a fully diluted basis, this translates to earnings per share of 39 cents, down from 65 cents in 3Q2019.
“We think recovery will not be imminent, as the formation of travel bubbles with other countries will likely be slow,” adds Seet, who has since trimmed his FY20-21F earnings by 13%.
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While he expects TalkMed’s management to continue disbursing dividends as it has done in the past, he reckons it will decrease to 2.7% in tandem with the fall in earnings.
On this note, Seet has lowered his target price on the counter to 49 cents, from 53 cents previously. This is believed to give it an upside of 9% from its 45-cent price on Nov 17.
Looking ahead, Seet says TalkMed’s strong balance sheet will weather it through this pandemic.
As at Sep 30, it held cash and cash equivalents of $90.8 million, up from $71.9 million in the previous year.
“If not for Covid-19, earnings recovery would have continued, as we understand that Executive Director and CEO Dr Ang Peng Tiam’s utilisation also increased significantly year-on-year,” he explains.
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Aside from this, he sees potential in the development of mesenchymal stem cells (MSCs), which are used in regenerative medicine and therapy as well as for aesthetic purposes overseas.
This project has been taken on by Stem Med, a subsidiary in which TalkMed has a 60% stake in.
A cause for concern is that cellular therapy in Singapore can only be approved when done under the auspices of clinical trials. As such, Seet believes that the main monetization of this here will possibly on come once regulations are altered.
As at 10.44am, shares of TalkMed were down 2.5 cents or 5.56% to 42 cents.
