Thomson Medical – Phillip
Recently, we visited Thomson Medical Center. After we obtained further updates from Thomson’s management, we found that Thomson’s fundamentals continue to remain sound. The average number of babies delivered every month at hospitals managed by Thomson over the past four months has surpassed 700, compared to the average deliveries of 639 in FY07. We believe the growth of child deliveries in Thomson will support well Thomson’s top line and bottom line growth in 2008. Due to weak market conditions, we have seen Thomson’s share price slide to S$0.62, which provides a good entry point to buy into this counter. However, we only recommend long- term investors to take a position due to the short term uncertainty of market.
Postponement of upgrade of two more wards. As the Group has seen increasing number of child deliveries, it could postpone the announced upgrading of two wards to 2H08. As there are just 1.5 months left in 1H08, we would expect that 1H08 will be less affected by upgrading and thus is likely to show a better than expected growth in 1H08. Overall, we retain our target for FY08 and FY09.
Reputable winner of the Singapore Prestige Brand Award 2007. Thomson has won the Singapore Prestige Brand Award once again in year 2007, the award honoring home-grown brands that have been established between 6 to 30 years ago. This recognition demonstrates outstanding performance in the communication and marketing of Thomson’s brand, and has explained why Thomson has taken a bigger bite of the shrinking pie.
Valuation! We maintain our forecast for FY08 and FY09 with net profit SGD 10.5 mln and SGD 12.0 mln. We still peg our PE at 24x FY07, and reach a fair value of 78.5 cents. Given that healthcare sector is more defensive during economic downturns, we feel it is worthwhile to consider Thomson during this time. Re-iterate Buy!