Excerpts from RHB report

Analysts: Lee Cai Ling & Jarick Seet

Singapore Medical Group: Buy On Dips; Upgrade To BUY

S'pore Medical Group

Share price:
38 c

Target: 
48 c

♦ Upgrade to BUY from Neutral, with unchanged DCF-based TP of SGD0.48, 26% upside. SMG’s share price 10 May.

The stock is currently trading at 14x P/E, a discount to its peer average of 23x P/E. We think that it is a good level to accumulate.



CHA Healthcare paid an average of SGD0.549/share. Singapore Medical Group first issued 30m shares via private placement to CHA Healthcare in Feb 2017 at SGD0.50/share, and subsequently, CHA subscribed to 3m rights shares at SGD0.48/share.

drbengteckleng3.18Dr Beng Teck Liang, CEO of Singapore Medical Group. NextInsight file photoIn Feb 2019, CHA increased its stake to 24.13% (from 6.87%) by purchasing 83m shares from SMG’s existing shareholders (including management) at SGD0.605/share.

CHA is also providing a SGD10m convertible loan at a conversion price of SGD0.423/share. About 80% of the loan has been earmarked for M&A activities. If the bond is converted, CHA stands to own 27.69% stake in SMG.

Near term profitability should be impacted by aggressive growth plan. In 1Q19, the group opened the O&G and paediatrics clinic in Punggol, and its second aesthetic clinic SW1 in downtown Singapore.

SMG also recently opened a breast care clinic last month. Regionally, it has expanded SW1 into Vietnam, and should take a new clinic 2-3 years to breakeven. The group intends to on-board 10-12 specialists this year, and new specialists may take time to ramp up their practice to full capacity.

Share price 1-year return of over 20%. The stock slipped 15% since 10 May with a 1-year return of -22.4%. Share price fell due to recent market sentiment, coupled with SMG’s higher operating cost as a result of its ongoing expansion plan.

Another overhang could be the price disparity between the conversion price (at SGD 0.423/share) of the convertible loan, and the sale of vendor shares (at SGD0.605/share), which may have raised some concerns as to the minority shareholders’ interests. The stock is currently trading at 14x P/E, a discount to peer average of c.23x P/E.

We upgrade to BUY from Neutral, with an unchanged DCF-based TP of SGD0.48, given the share price has fallen 15% from SGD0.445 to SGD0.38, at a 52 week low since 10 May.

FY19F P/E was trading at 16.8x compared to the current 14.4x. We think this is a good opportunity to buy on dips.


Full report here


Share Prices

Counter NameLastChange
AEM Holdings1.000-0.050
Alliance Mineral0.145-0.006
Anchor Resources0.013-
AusGroup0.026-0.002
Avi-Tech Electronics0.2800.015
Best World Int.1.360-
China Sunsine1.120-
CSE Global0.475-0.015
Food Empire0.495-0.005
Geo Energy0.150-0.001
Golden Energy0.215-0.010
GSS Energy0.086-0.002
HMI0.6500.005
ISDN Holdings0.230-
KSH Holdings0.415-0.005
Miyoshi0.043-0.001
Moya Asia0.075-0.003
Nordic Group0.280-0.020
Oxley Holdings0.325-0.005
REX International0.073-0.001
Riverstone0.9950.010
Roxy-Pacific0.390-0.005
Sing Holdings0.3950.010
SingMedical0.385-0.005
Sino Grandness0.042-0.002
Straco Corp.0.750-
Sunningdale Tech1.330-0.010
Sunpower Group0.470-0.005
The Trendlines0.077-
Tiong Seng0.2300.005
Uni-Asia Group0.755-0.005
XMH Holdings0.153-
Yangzijiang Shipbldg1.520-

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 813 guests and no members online