Thomson – DMG

Continues to deliver

Thomson Medical’s 1QFY10 results were within our expectations. Earnings jumped 23.9% YoY to S$3.5m on the back of a 14.6% YoY increase in revenue to S$18.8m, due to increased baby deliveries and higher utilisation of its specialist services. Its growing Thomson Women’s Cancer Centre (TWCC), which started operations in Feb 09 also contributed to the improved revenue. Going forward, its Singapore operations are expected to continue doing well, with the addition of another O&G specialist tenant in 3QFY10 and opening of new Thomson Women’s Clinics (TWC) in its network. Its Vietnam ventures are progressing well. Its hospital in Binh Duong is set to start operations in 3QFY10 and Thomson Medical has completed the business plans for another hospital project in Hanoi. Maintain BUY and target price of S$0.78.

JV with senior paediatricians to expand its services. As part of its plans for organic growth and to strengthen its position as a leading women’s and children’s healthcare provider, Thomson Medical will be establishing the Thomson Paediatric Centre (TPC) in a JV with two senior paediatric consultants to operate the Thomson Paediatric Centre, specialising in the management of children’s health. Previously, paediatric services at its hospital are provided by its tenant paediatricians. With this JV, Thomson Medical would be able to have a bite of the growing demand for paediatric services in Singapore and the region. TPC would also add to revenue growth going forward.

Patient admissions and baby deliveries expected to continue to improve. Thomson Medical continues to attract O&G specialists to set up clinics at its hospital. A senior O&G specialist will set up clinic at Thomson Medical in 3QFY10. With this, we expect the utilisation of its facilities to increase, thereby contributing to revenue growth. Coupled with its new resort-styled wards, we think that patient admissions (and in turn, baby deliveries) at Thomson Medical would increase as well.

Maintain BUY. We are maintaining our earnings estimate of S$14.2m for FY10. Our 12-month target price of S$0.78 is based on 16x FY10 earnings, a 20% discount to the larger industry players.

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