DMG Research
October 27, 2009
SINGAPORE EQUITY Investment Research FY09 Results Review
Private Circulation Only
HEALTHCARE BUY Price Target
Maintain S$0.62 S$0.78
Lynette Tan +65 6232 3895
[email protected]
THOMSON MEDICAL CENTRE
Terence Wong, CFA +65 6232 3896 terence.wong @dmgaps.com.sg
TWCC and Vietnam hospital to support growth
Stock Profile/Statistics Bloomberg Ticker STI Issued Share Capital (m) Market Capitalisation (S$m) 52 week H | L Price (S$) Average Volume (3m) ‘000 YTD Returns (%) Net gearing (x) Altman Z-Score ROCE/WACC Beta (x) Book Value/share (S¢)
THOM SP 2694.50 291.98 181.03 0.63 0.37 190.68 27.84 Net cash 6.49 0.91 0.74 38.12
Major Shareholders (%) T Holdings Pte Ltd Harilela Hari Naroomal Cheng Wei Chen Credit Suisse Group
19.98 34.75 16.21 5.01
Share Performance (%) Month 1m 3m 6m 12m
Absolute 5.1 12.7 45.9 53.1
Relative 2.6 8.2 -2.3 -8.6
6-month Share Price Performance S$ 0.65
0.60
Thomson Medical’s FY(Aug)09 earnings came in within our expectations. Revenue achieved was S$67.4m (+11.8%), on the back of a record number of baby deliveries (8,907 babies) during the year and contribution from its Thomson Women’s Cancer Centre (TWCC). Net profit for FY09 grew by 14.2% YoY to S$12.8m. Going ahead, we expect its TWCC and network of Thomson Women’s Clinics (TWC) to continue driving growth. FY10 will see maiden full-year contribution from TWCC and the opening of another TWC, which would contribute to growth. Its hospital project in Binh Duong, Vietnam (Hanh Phuc Hospital) which is likely to commence in 3Q FY10, will also boost earnings growth. Management declared total dividends of 2.8 S¢ per share (including 0.3 S¢ special and 1.0 S¢ interim) for FY09. It is trading at a decent yield of 4.5%. Based on its peer average (ex-Parkway) of 16x, we arrive at a 12-month target price of S$0.78. Maintain BUY. Attracting patients by being innovative. Thomson Medical is the first hospital in Singapore to launch an interactive and personalised pregnancy and baby website. Through this, it aims to deliver more value to mothers-to-be and attract more baby deliveries at its hospital. To cope with the increasing demand for its services, Thomson Medical will be adding two more operating theatres to its current four. As it starts to market its TWCC across the region, contribution from TWCC is expected to grow and boost overall Group performance in FY10. Tapping on the growing popularity of traditional Chinese medicine (TCM), Thomson Medical has also started offering TCM services to its patients. This would serve to complement its existing O&G services, allowing it to offer East and West treatments to patients. We think that these initiatives would help boost its branding and in turn, contribute to growth.
0.55
0.50
0.45
0.40 Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Hanh Phuc Hospital project slated to commence operations in 3Q FY10. The construction for this hospital will be completed within the next two months. Once in operation, Thomson Medical would receive hospital management fees for running the Hanh Phuc Hospital, which would contribute to revenue and earnings growth. Maintain BUY. We are estimating earnings of S$14.2m (+10.9%) for FY10. We arrive at a 12-month target price of S$0.78, based on 16x FY10 earnings. FYE 31 Aug (S$m) Turnover Net Profit % chg YoY EPS (S¢) DPS (S¢) Div Yield ROE ROA P/E (x) P/B (x)
FY07
FY08
FY09
FY10F
FY11F
52.4 9.5 39.8% 3.3 2.5 4.0% 11.1% 8.7% 19.2 2.0
60.3 11.2 18.0% 3.8 2.5 4.0% 11.1% 9.0% 16.3 1.7
67.4 12.8 14.2% 4.4 2.8 4.5% 11.6% 9.7% 14.3 1.6
77.0 14.2 10.9% 4.9 2.5 4.0% 12.4% 10.3% 12.9 1.5
88.5 16.0 12.5% 5.5 2.7 4.4% 13.0% 10.7% 11.4 1.4
Source: Company and DMG Estimates
DMG Research See important disclosures at the end of this publication
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DMG Research
October 27, 2009
Year End 31 Dec (S$m) Income Statement
Cash Flow 2008
2009
2010F
2011F
60.3 (33.7) 1.0 (8.4) (5.1) (0.3) 13.8 (2.6) 0.0 11.2
67.4 (38.3) 2.1 (9.8) (5.5) (0.1) 15.7 (3.0) 0.1 12.8
77.0 (43.6) 1.5 (11.2) (6.2) (0.2) 17.4 (3.3) 0.1 14.2
88.5 (50.0) 1.3 (12.8) (7.3) (0.2) 19.6 (3.7) 0.1 16.0
2008
2009
2010F
2011F
Fixed Assets
109.0
106.9
109.6
112.2
Goodwill Non-Current Assets Inventories Trade and other receivables Cash and cash equivalents Current Assets
0.1 109.2 1.0 5.4 15.6 21.9
0.1 107.1 1.2 4.3 20.6 26.0
0.1 109.7 1.2 4.6 27.6 33.4
0.1 112.3 1.4 5.3 35.2 41.9
Total Assets
131.1
133.1
143.2
154.3
2.7 1.6 4.4 13.2
1.4 1.7 3.0 15.1
1.4 1.9 3.3 17.3
1.3 1.6 2.9 19.9
0.1 2.5 1.4 17.2 109.5
2.3 1.4 18.7 111.3
3.0 1.3 21.6 118.3
3.3 1.3 24.5 126.9
0.1
0.0
0.0
0.0
Revenue Cost of sales Other Operating Income Administration expenses Other operating expenses Financial income, net Profit Before Taxes Income Tax Expense Minority Interest Net Income Balance Sheet
Bank borrowings Deferred tax Non-current liabilities Trade and other payables Obligations under finance leases Provision for tax Bank borrowings Current Liabilities Net assets Minority interests
Share capital Reserves Shareholder’s equity
37.5
37.5
37.5
37.5
72.0 109.5
73.8 111.3
80.8 118.3
89.4 126.9
2008
2009
2010F
2011F
Profit Before Taxation Non-cash Items Changes in Working Capital Income Tax Paid Interest Paid Net cash from operations
13.8 3.3 (0.9) (2.2) (0.3) 13.7
15.7 3.9 2.8 (3.2) (0.1) 19.0
17.4 3.1 1.8 (2..3) (0.2) 19.9
19.6 3.1 1.7 (3.0) (0.2) 21.3
Acquisition of Fixed Assets Interest Received Others Net cash from investments Dividends Paid Proceeds from/(Repayment of) Loan Others Net cash from financing Net increase / (decrease) in cash Cash (beginning) Cash (end)
(3.3) 0.2 0.0 (3.1) (5.8)
(5.3) 0.1 (5.3) (7.3)
(6.0) 0.3 (5.7) (7.2)
(6.0) 0.4 (5.6) (8.0)
(4.5) (0.0) (10.3)
(1.4) (0.0) (8.8)
(7.2)
(0.1) (8.1)
0.3 15.2 15.4
5.0 15.4 20.4
7.0 20.4 27.4
7.6 27.4 35.0
Ratios 2008
2009
2010F
2011F
Growth & Margin (%) Revenue Growth EBIT Growth EBIT Margin Pretax Profit Growth Pretax Profit Margin
15.1 19.3 23.3 21.1 22.8
11.8 12.5 23.5 14.0 23.3
14.2 10.9 22.8 11.0 22.6
15.0 12.5 22.3 12.5 22.1
Tax rate Net Income Growth Net Income Margin
18.9 18.0 18.6
18.9 14.2 19.0
18.9 10.9 18.4
18.9 12.5 18.0
2008
2008
2009F
2010F
47.7
51.9
58.3
67.1
12.5 60.3
15.5 67.4
18.6 77.0
21.4 88.5
Revenue Breakdown Hospital Operations and Ancillary Services Specialised and Other Services Total
Source: Company and DMG estimates
DMG Research See important disclosures at the end of this publication
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DMG Research
October 27, 2009
DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage
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DMG Research See important disclosures at the end of this publication
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