SINGAPORE (Nov 8): RHB has downgraded its call on TalkMed Group to “neutral” from “buy” previously while raising its target price from 69 cents to 72 cents, which implies 29 times FY18F P/E.
This comes even after the group reported better-than-expected 3Q17 results after mitigating impacts from the suspension of CEO Dr Ang Peng Tiam by the Singapore Medical Council (SMC), such that 3Q17 NPAT only dropped 17.2% y-o-y.
See: TalkMed's 3Q earnings fall 17% to $7.1 mil
See: TalkMed CEO Ang Peng Tiam handed 8-month suspension for professional misconduct in 2010
In a Wednesday report, analyst Jarick Seet explains that the downgrade comes as a result of TalkMed’s share price exceeding RHB’s previous target price of 69 cents to imply only a 1% upside.
Nonetheless, he expects Ang’s suspension and the drop in earnings to be “just a small bump” in the group’s longer-term outlook – especially with a high possibility of mergers and acquisitions (M&As) in the near future with the group’s net cash position and a current war chest of over $65 million.
Due to better-than-expected 9M17 earnings which make up 84% of RHB’s estimates, the research house has raised FY17F PATMI estimates by 4%.
“The group is also likely to acquire local private clinics, either in the existing medical field or via expansion into new medical-based areas. As a result, we do expect M&A plans to still be one of the top priorities on management’s agenda,” says Seet.
While TalkMed’s 60%-owned subsidiary Stem Med recently announced it has embarked on a research and clinical programme for the usage of Mesenchymal stem cells (MSCs) in the region, the analyst reiterates that cellular therapy in Singapore can only be approved under the auspices of clinical trials.
See: Monetisation of TalkMed’s stem cell treatment for cancer will have to wait
“The main monetisation of these therapies domestically would only likely come when there are changes in the regulations,” he adds.
As at 11.38am, shares in TalkMed are trading 0.71% lower at 70 cents, 12.2 times FY18F price-to-book value.
