Niche Private Specialist Healthcare Provider

• Established in 2005 and listed on the SGX since 2009, Singapore Medical Group (SGX:5OT) is a private specialist healthcare provider with an extensive network of more than 45 owned and associated clinics covering over 25 medical specialties. Its Health and Diagnostic & Aesthetics segments contributed about 62% and 38% of FY21 revenue respectively.
• Singapore Medical Group has a growing regional presence in Ho Chi Minh City, Vietnam, Jakarta and Surabaya in Indonesia and across multiple cities in Australia following several investments and JVs with strategic partners.

Medical Tourism Drives Topline Amid Cost Increases

• Singapore Medical Group's 1H22 revenue grew 8.9% y-o-y to a record of S$54.1m, driven by higher growth within the diagnostic segment and key specialist verticals such as imaging, oncology and cardiology, as well as the return of medical tourism. Foreign patients historically account for about 15-20% of SMG’s total turnover.
• That said, Singapore Medical Group faces headwinds in terms of costs pressure as 1H22 net profit fell 12.9% y-o-y to S$6.3m, due to increases in doctors’ remuneration, staff costs and the absence of wage credits.

Pursues Organic Growth Via Increasing Capacity

• Apart from its overseas expansion, Singapore Medical Group is also charting organic growth initiatives in Singapore through the opening of new clinics and increasing capacity within existing facilities.
• To take advantage of the sustained demand from consumers, Singapore Medical Group seeks to further strengthen its niche position within the women’s and children’s space through the hiring of new O&G specialists and paediatricians.
• Singapore Medical Group has a pretty robust balance sheet with net cash of S$24.6m as at end-Jun 2022.

Privatisation Bid From Controlling Shareholders

• TLW Success, an investment vehicle owned by Singapore Medical Group’s top executives, recently launched an offer to take it private at S$0.37 per share in cash or 1 new share in the bidder. This values the group at S$180m or ~14x FY22 annualised P/E. To-date, TLW has received irrevocable undertakings from key shareholders, which hold about 51.7% stake to accept the share alternative of the offer.
• Note the offer is conditional upon TLW and its concert parties holding more than 90% of the group at the offer’s close. If successful, TLW does not intend to retain Singapore Medical Group’s listing status.

Source: Maybank Research - 23 Sep 2022