ISEC Healthcare, a relatively low-profile SGX-listed healthcare counter, is gearing up for a big expansion with an eye on growing regional demand for its services while paying out a steady dividend income stream, says SAC Capital analysts June Yap and Matthias Chan in a non-rated note on March 18.
Incorporated in 2014, ISEC Healthcare 40T provides medical eye care services ranging from cataract, Lasik to complex corneal transplantation surgeries.
For FY2023, the company increased its revenue by 11.2% y-o-y to $70 million and earnings by 3.3% y-o-y to $13.2 million, thanks to stronger demand for speciality eye care services in Singapore, Malaysia and other emerging countries in Southeast Asia.
Over 70% of ISEC Healthcare's sales come from Malaysia with around 50% of its Malaysia’s sales coming from its flagship center in Mid-Valley, Kuala Lumpur.
To meet the demand in Mid-Valley, ISEC plans to build a new 15-storey building that will at least triple its clinical space. In addition, there are plans to open at least 4 more centres outside of Klang Valley. "ISEC is well-positioned to capitalize on Malaysia’s population size of 33.5 million," the analysts write.
They also note that between 2020 and 2023, the company tripled its earnings to $13.2 million, using an asset-light business model which Yap and Chan believe will be sustainable.
The analysts believe there's strong potential in emerging Indochina.
"Using its Singapore and Malaysia franchise as a springboard, its scalable business model and the expertise to operate eye centres in these emerging markets has allowed ISEC to explore rolling out expansion plans to emerging markets in the coming years," write the analysts.
For FY2023, the company has declared a final dividend of 0.85 cents, which compares with 1.08 cents per share paid for FY2022.
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The SAC analysts point out that ISEC has a track record of paying an attractive dividend payout to shareholders while its strong balance sheet, with a net cash of $17.2 million as at end 2023, gives it the strength to fund its expansion plans and simultaneously reward shareholders with dividends.
ISEC Healthcare shares last traded at 42 cents, down 10.64% year to date.
