Month: April 2008
Thomson Medical – CIMB
A little more space
• In line. 1HFY08 net profit of S$5.7m (+28% yoy) is in line with our expectations and consensus.
• Revenue rose 22% yoy to S$29.5m, driven by Hospital Operations (+21% yoy) and Specialised Services (+27% yoy). Revenue from Hospital Operations rose to S$23.6m on the back of the full operation of two upgraded wards, higher baby deliveries (+15% yoy to 4,413 babies) and increased inpatient admissions from patient referrals from tenant specialists, peripheral specialists and the network of Thomson Women’s Clinics. Revenue from Specialised Services increased to S$6.0m on higher contributions from all its subsidiaries. The hospital consultancy project in Vietnam is progressing on schedule, with a further S$0.3m in consultancy fees recognised in 1HFY08 in addition to the S$0.2m recognised in FY07.
• Margin improvements. Despite higher operating expenses (including higher business costs and staff salaries), gross and net profit margins improved to 44.6% and 19.3% respectively, thanks to strong revenue and cost management.
• Operational update. The hospital is reconfiguring space previously occupied by the administrative office on Level 6, to add six patient rooms, four of which will be suites. Completion is expected at end-Apr 08. It will also continue to upgrade Level 3 inpatient wards in 2HFY08, and add two operating theatres to the current four to meet the demand for surgical procedures. The Thomson Lifestyle Centre on Level 5 will be relocated to Novena Medical Centre to make way for more clinic space. The group opened its seventh Thomson Women’s Clinic in Mar 08 and will continue to expand its network of satellite clinics. Regionally, a business plan has been completed for setting up a fertility centre in Vietnam to tap the significant unmet
demand.
• Maintain Neutral and target price of S$0.77. We have kept our earnings estimates unchanged. Our target price remains S$0.77, based on 15x CY09 P/E. Maintain Neutral on the back of potential capacity constraints in the longer term. Stock catalysts could come from regional hospital projects and management consultancy contract wins.
Thomson Medical – BT
Thomson Medical H1 profit up 28%
THOMSON Medical Centre has posted sizable gains in interim earnings, thanks to higher patient numbers boosted by the centre’s efforts to upgrade and refurbish its hospital operations.
The group, which is a niche premium healthcare provider for women and children, reported a 28.3 per cent increase in net profit attributable to shareholders to $5.7 million for the six months to Feb 29, 2008, from $4.44 million a year ago.
Earnings per share rose to 1.95 cents, from 1.52 cents last year, while revenue grew 21.8 per cent to $29.5 million.
Thomson Medical declared an interim dividend of one cent a share. This compares with an interim dividend and a special interim dividend each of 0.75-cent a share previously. Thomson Medical shares were last traded at 62.5 cents each.
The group attributed its improved earnings performance to higher revenue contributions from its hospital operations and specialised services divisions.
It had completed the upgrading of two in-patient wards in FY2007, giving them a resort-style ambience. The full operation of the upgraded wards, more baby deliveries and increased referrals from its tenant specialists, peripheral specialists and the group’s network of Thomson Women’s Clinics also led to better utilisation of its in-patient facilities and its diagnostic and ancillary services.
The group also posted new records: it delivered 4,413 babies in the first half of FY2008, with 818 babies in November alone. Its average monthly delivery rate rose to 740 babies, from 640 babies the year before.
It also saw improved revenue takings from its subsidiaries – Thomson Fertility Centre, Thomson Pre-Natal Diagnostic Laboratory, Thomson Women’s Clinic, Thomson International Health Services and Thomson Aesthetics Centre.
And it continues to recognise fee income from its consultancy project for a private women and children’s hospital in Vietnam.
Said executive chairman Cheng Wei Chen: ‘Looking ahead, we are confident that the government’s pro-family initiatives will reap positive results.’
The group is well-positioned to benefit from this effort, increasing medical tourism, and the recent changes in healthcare policies such as means testing for subsidised care, which could potentially increase demand for private healthcare services.’
The group intends to extend its hospital upgrading programme to more in-patient wards, and will add another two operating theatres to the current four.
Thomson Medical is optimistic about doing well for the second half.
Thomson Medical – DBS
Delivering the goodies
Story: 1H08 earnings grew 28% y-o-y to S$5.7m, slightly stronger than we expected, on the back of higher revenue and improved operating margins.
Point: Revenue for 1H08 at S$29.5m was 22% stronger than 1H07 as the Hospital delivered an average of 740 babies per month compared to 640 in 1H07. TMC achieved a record 818 deliveries in Nov 2007 as the newly refurbished resort-style facilities attracted more patients. The upgraded facilities also helped to improve gross margin by 2.3 ppts to 44.6%and operating margin by 1.6 ppts to 24.1%. The Group continued to recognise consultancy fees from the Vietnam venture with a further S$0.3m being received in 1H08. It also managed to optimize space utilization as promised. With the administrative office at Level 6 moved off-site, six new patient rooms are being added, including four suites. In addition, the Thomson Lifestyle Centre on Level 5 will be moved to the nearby Novena Medical Centre to create more space for clinics. Also in line is the renovation of Level 3 and addition of two operating theatres.
Relevance: We raised FY08F and FY09F earnings by 4.6% and 3.1%, respectively, after taking into account the higher-than-expected inpatient admissions and improved operating margins in 1H08. However, we reduce our DCFbacked Target Price to S$0.77, after imputing a higher WACC of 8.0%; market risk perceptions have changed since our previous report. This translates to 19.4x FY08 earnings and 17.5x FY09 earnings, a considerable discount to other full-serviced hospitals listed in Singapore. Dividend yield in excess of 3% should also support the stock price. Hence, we maintain our BUY recommendation for Thomson Medical.
STEng – JPMorgan
Skybus Airlines filed for bankruptcy – ALERT
• Skybus Airlines filed for Chapter 11: ST Engineering has announced that Skybus Airlines has filed for bankruptcy on 7 April 2008. The low cost carrier was operating a fleet of 11 aircraft.
• ST Engineering’s US$635MM contract to cease: ST Engineering’s unit, ST Mobile Aerospace Engineering (MAE), was awarded the US$635MM (S$1Bn) Total Aviation Support contract by Airbus in Nov 2006 to provide aircraft line and light maintenance, components management and support, engineering and technical services for Skybus’ fleet over a period of 12 years.
• Minimal impact on FY08E earnings: We estimate that the loss of this contract will impact our estimate for the group net profit by less than 2%. Furthermore, the contract was concluded when the SGD/USD exchange rate was about 1.58. On the bad debt front, management highlighted that because operations only commenced in mid-2007, losses arising from bad debt are insignificant.
• Existing capacity to be redeployed to other customers: As a result, the spares provided by ST Aerospace to support Skybus on its Maintenance-by-The-Hour arrangement would be redeployed to support other customers of ST Aerospace.
• Management is confident of continual contract momentum: Management highlighted that it is confident of continual contract momentum from its Aerospace division given its strong track record. However, we believe that there could be potential headwinds ahead. Although management guided modest FY08 net earnings growth, Aerospace could still see margin pressure should commercial airlines continue to face margin compression. While we do not expect volume to fall off, MRO rates could come under pressure if airlines continue to be hurt from falling yields due higher input costs including fuels and higher capex costs. Maintain
OW.
SPH – BT
SPH, Star Publications in JV
SINGAPORE Press Holdings (SPH), through SPH Interactive International Pte Ltd (SPH II), has forged a joint venture (JV) with Star Publications (Malaysia) to provide digital media services in Malaysia.
The JV is called 701Panduan Sdn Bhd. In Malay, panduan means to provide direction or guidance, which is what 701Panduan aims to do by helping consumers find what they need on new media platforms.
The authorised and paid-up capital of 701Panduan is RM60 million (S$26 million), with SPH II and Star Publications each holding 50 per cent.
The deal was signed yesterday at the headquarters of Star Publications in Kuala Lumpur, Malaysia. Star Publications publishes The Star, Malaysia’s most widely read English daily.
Leslie Fong, a director of SPH II and SPH’s senior executive vice-president of marketing, said: ‘Malaysia has one of the highest Internet penetration rates in South-east Asia. More than half of its 28 million people enjoy ready access to the Internet. In absolute numbers, this is more than Singapore’s entire population. Together with the country’s growing economy, this makes investing in the online business an attractive proposition.’
Mr Fong said that The Star is a top partner with a strong brand name and an established network of readers and advertisers.
Star chief operating officer Linda Ngiam said: ‘The Star has spent more than 12 years establishing a leadership position on the Malaysian Internet scene. We are happy to enter into this partnership with SPH, which will take our online and new media properties to the next level.’
SPH said that the transaction will have no material impact on its earnings and net assets per share for the financial year ending Aug 31, 2008.
SPH shares closed unchanged at $4.62 yesterday.