Maybank Securities’ Eric Ong has lowered his target price for Thomson Medical Group A50 from 8 cents to 6 cents, following the group’s FY2024 results ended June which saw a 57.8% y-o-y lower earnings of $15.4 million.
However, Ong has kept his “buy” call on the healthcare group. The analyst says that the group’s headline patmi of $13.4 million for the 2HFY2024 came in below his projections mainly due to higher-than-expected opex and finance costs. The higher-than-expected costs came after the group completed its acquisition of FV Hospital in Vietnam in January.
The analyst notes that revenue rose 6.6% y-o-y to $183 million for the second half on the back of topline contribution of $50.4 million from the Vietnam hospital, which provides a “strong addition”.
However, the increase was partially offset by the cessation of project-related services, such as managing the vaccination centres and the Transitional Care Facilities (TCF) in Singapore in Dec 2023, as well as lower patient loads and case intensity, termination of certain customer contracts and discounts given to customers in Malaysia.
The analyst says that growth could take longer than anticipated to play out, driven by execution risks, while the acquisition has led to a high leverage for the group particularly in the current high interest rate environment.
Yet, several upside factors are present.
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Ong notes the group’s attempt to broaden its reach as a regional player. He says that Thomson Medical is trying to enhance its specialist services in Vietnam, with the FV Hospital launching the region’s first thoracic surgery centre, which will serve Cambodia, Vietnam, Laos, and Myanmar.
To drive synergies across its Southeast Asia footprint, it is also expanding its doctor network, enhancing digital patient engagement and sharing clinical expertise across its key markets, he says.
The analyst highlights that prime minister Lawrence Wong’s national day rally speech which unveiled more parental support for newborns should boost the nation’s fertility rate, which in turn should benefit Thomson Medical Group given its market leadership in childbirth services.
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Ong also notes that the group could potentially monetise or unlock the value of its 9.2ha of freehold waterfront land strategically located in Johor Bahru’s city centre, which is currently carried at historical cost (estimated to be at $255 million) in its balance sheet.
As at 4.40pm, shares in Thomson Medical are trading flat at 5 cents.
