Author: tfwee
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.
SingTel – BT
Cancelled Optus deal a blow to SingTel
EARLY last week, newspapers here carried small reports on a cancelled project of Optus, the Australian unit of Singapore Telecommunications.
They said that as a result of the Australian government termination, the A$16 million (S$xx million) which Optus had already spent on the A$1.9 billion broadband network, would be written off, with negligible impact on SingTel for the year ended March 31.
In Australia, the news made much bigger headlines mainly because the cancelled project was seen as a casualty of the changes in the country’s political landscape. What the Rudd government did was to axe a A$958 million funding agreement signed by its predecessor last September with Opel Networks, 50 per cent owned by Optus. The project was aimed at building a faster broadband network for almost 900,000 underserved households in rural and remote areas.
Optus, Australia’s second largest telco, had worked on the project some two years now. It submitted a bid in August 2006 and was declared winner of the tender in June last year in a bitterly fought contest against Telstra, the country’s biggest telco.
Telstra, in fact, continued the battle even after the tender was awarded, making legal challenges. It only recently ended its court attempt to access official documents through which it said it hoped to show how the former government had awarded Opel the contract. Telstra had also argued that the project would have overlapped with its existing network.
Communications Minister Stephen Conroy, when he was in the Opposition, had been vehemently against the project. He said that the decision to cancel was based on the Department of Communications’s assessment that Opel would not achieve coverage requirements.
Optus has naturally protested that the coverage requirements in the contract would be met and has offered to have an independent party audit Opel’s coverage. It also said that three successive attempts to meet the Department Secretary were ignored.
The Sydney Morning Herald said that some 100 staff had been working on the project for two years and Optus was to have funded the bulk of about A$900 million needed to set up Opel.
A furious Paul O’Sullivan, chief executive of Optus, said that the two companies had invested significant resources in the project and it was simply unacceptable to have the contract terminated in this fashion.
He said that the decision would dent confidence about future tender processes. He also reportedly said that Optus would be seeking detailed assurances from the government before participating in the upcoming A$8 billion national broadband network before it could commit to bidding for the right to build it.
The rural broadband network could potentially have given Optus a shot at attracting 900,000 more customers. In addition, it could have earned revenue from the new network by wholesaling to other operators at prices 30 per cent lower than existing levels.
While there are no projections of how much Optus could have earned from the project, it is likely to have been significant. For many quarters now, Optus has been struggling to increase revenue and profit in a very competitive market. For the third quarter ended Dec 31, 2007, it posted an increase in operating revenue of 3.6 per cent to A$2 billion.
While the write-offs from the cancellation of the project is negligible for the group, which posted operating revenue of A$10 billion for the past three quarters, that does not include the time and energy expended over the last two years. That must have been considerable, and now there’s nothing to show for it.
Optus did say that it is considering all options but it is really not feasible to fight the government, at least not without spending more precious time and money.
The latest development Down Under is a big blow to SingTel which paid S$13 billion for Optus in 2001. Optus makes up about two-thirds of SingTel’s revenue and one-third of its profit.
Winning the tender last year had been regarded as something of a coup as Optus has constantly had to fight Telstra every step of the way – not just in landing the bid – but in trying to retain market share. A JP Morgan note said that the termination is a setback for the group as the deal would have otherwise strengthened Optus against Telstra.
Still, the market seems to have shrugged off the termination. SingTel’s stock price ended Friday at $3.95, a level it has been trading at for the last two weeks. Perhaps, it is now hoping that SingTel would instead be more inclined to deliver a bigger dividend to shareholders.