Our DCF-derived target price of S$1.27 (WACC: 8.4%) remains unchanged and we maintain an ADD rating.
Performed as expected
2Q15’s revenue grew marginally by 1.7% yoy, due to an increase in revenue from patients requiring higher intensity care. The number of patient visits to TalkMed has stayed relatively stable, while the number of doctors has grown to 13 to cope with the larger scale of business. We saw a 54.9% rise in operating lease expenses from S$0.19m in 2Q14 to S$0.29m in 2Q15 as a result of new operating leases effected in Mar and Jun 15.
Re-investing the extra cash
Besides co-investing in Stem Med, a provider of cellular therapy-related medical services, with StemCord for S$1.8m in Jan 15, TalkMed also recently acquired a 30% stake in Hong Kong Integrated Oncology Centre Holdings Limited (HKIOC) for S$11.5m, signalling its first overseas venture. As these investments are still in the early stages, there was a share of loss after tax of associate of S$0.26m attributed to HKIOC, which had only operated for about a month. We project HKIOC to incur S$1m of share of loss for FY15-16 annually before possibly breaking even in FY17.
Stable business and financials
We continue to like the oncology specialist business that TalkMed offers, especially in an environment where the incidence of cancer is on an upward trend. According to the National Registry of Diseases Office in Singapore, 13,416 people were diagnosed with cancer in 2014, vs 12,651 in 2013 and 12,295 in 2012. Its net cash position (no debt) and FY15-17 forecasted dividend yield of 4.1-4.6% also makes TalkMed more attractive than other healthcare plays in Singapore (see figure 1). However, one key risk to the business is the high reliance on key founder and CEO, Dr Ang. (Read Report)
Source : CIMB Research