DBS Group Research, in an unrated report, calls Thomson Medical Group A50 a "diamond in the rough" with a strong portfolio of healthcare assets in Singapore and Malaysia, and with potential for further growth across the region with its recent acquisition of a hospital in Vietnam.
“Thomson Medical Group has a strong reputation as one of the largest private providers of healthcare services for women and children in Singapore,” write analysts Rachel Tan and Amanda Tan in their Dec 15 note.
“TMG’s niche focus on O&G places it in a prime position to grow its presence in the in vitro fertilisation (IVF) market across APAC. Aside from O&G, TMG aspires to expand its medical speciality and progressively flourish into a reputable full healthcare service provider,” they add.
The company now runs the Thomson Medical Centre and 37 clinics and centres in Singapore.
The analysts are optimistic that the recent acquisition of FV Hospital in Vietnam for $517.1 million will help drive geographic diversification and spur growth, given how healthcare expenditure per capita in Vietnam has grown at a CAGR of 9.2% between 2017 and 2022, a faster clip versus rest of the region.
“We understand the group remains on the lookout for further M&A opportunities in countries such as Thailand, Indonesia, and Cambodia, to expand its pan-Asian footprint, but also seeks to de-risk via partnerships,” the analysts write.
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They project the company to report revenue and EBITDA growth at CAGRs of 12% and 11% between 2024-2026, driven by organic and inorganic factors.
FV alone, which adds 230 beds to the total of 757 beds, is seen to grow Thomson Medical’s top line and EBITDA by 26% and 19% in FY2025.
“Planned addition of licensed beds across Singapore, Malaysia will also augment longer-term profitability and cashflows,” the analysts say.
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Despite trading at a premium to its peers, TMG is expected to deliver EBITDA growth with a CAGR of 11% between FY2024 and FY2026, much stronger than some of its peers with maturing operations.
They’ve given the stock, which last traded at 6 cents, a fair value estimate of 8 cents, based on 23x FY25 EBITDA, which is 0.5SD below the historical mean.
