Thomson Medical – DMG

Peter Lim makes GO at S$1.75

Peter Lim, Singapore’s billionaire private investor, has acquired a 39.34% stake in Thomson Medical from Dr Cheng Wei Chen and his family (founder and largest shareholder) at S$1.75/share, a 62% premium over the last traded price. The purchase was made via a married deal between Cheng and Lim’s investment holding company, Sasteria. Pursuant to Singapore’s Code on Takeovers and Mergers, the cash offer will be extended to the remaining issued shares and is conditional upon Sasteria acquiring more than 50% of the Group. Given that this prices the stock at a lofty 30x FY11 P/E, a level not seen before, we believe that investors should accept the offer.

Strong interest in healthcare. Lim has been snapping up healthcare holdings in the past few months. He took up a 29.6% stake in Malaysia-listed TMC Life, which specialises in fertility treatment and stem cell banking. He is the second largest shareholder. More recently, he accumulated a 7% stake in SGX-listed Healthway, but has since pared down to a touch below 5%. Lim is likely to seek synergies with his healthcare holdings, particularly Thomson Medical and TMC Life.

Implications for other healthcare stocks. This takeover could have a positive spillover impact on the one other major healthcare player listed on SGX – Raffles Medical Group. At S$2.18, it is currently trading at 24.5x FY11 P/E. We have a BUY on the counter, with a TP of S$2.40.

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