Long-term potential to compensate start-up losses
HMI has committed SGD40m to acquire a 62.5% stake in StarMed @ Farrer Square, a new ambulatory care centre in Singapore. HMI could tap into the positive trend of more day procedures being done outside of hospitals and expand its presence in the ASEAN region. We expect startup losses of SGD1-2m for the first two years of operations, but this deal should be positive over the long term. Accordingly, we trimmed our FY19-20E EPS by 4-7% but maintain our DCF-based TP of SGD0.80 (WACC 7.4%, LTG 2.0%) as we expect earnings contribution in FY21E onwards to compensate for the start-up losses with upside potential on good startup.