Sunday, August 28, 2005

 

Thomson Medical - A Case Study

Updates
  1. 20-Nov-05 : Added in FY05 Results (Released on 27-Oct-05)
  2. 24-Sep-05 : Thomson share price hit $0.205 on 22-Sep, the first time it closed above $0.20 since Feb-05. It has hit my first tgt which I had previously planned to sell some of my hldgs when I first did this study. Now, after looking at the other healthcare stocks which have hospital operations like Parkway, Raffles Medical and even loss-making HMI being traded at a premium to NAV, I have decided not to sell till the FY05 results are announced or if share price goes above NAV of $0.25. I don't expect any negative surprises and if results are good, I may even consider to hold for longer term. Note that prices may drop again in the coming weeks as it had gone up a bit too fast (aro' 10%) fm $0.185.

Background (Not Updated)
Thomson Medical had been trading below its IPO price of $0.22 since listing in 26-Jan-05. I wanted to apply for the IPO but good thing I missed it as I was busy then. I bought my first lots in Mar-05 when we were expecting our 2nd kid and was visiting Thomson regularly for check-ups. It's always very crowded and the waiting time so long, so I assume biz must be very good. Also, a lot of publicity aro' then due to Zoe Tay delivering there.

Recently, after my studies on HMI, I have been accumulating Thomson Medical shares. Now, a full study to justify my purchases :D


Financial Data
All the data in this case study are extracted fm the Thomson Medical 2004 Annual Report. Some of the figures in the fllwg table are extracted fm the periodical "Shares Investment",

Thomson Medical2001200220031H0420041H052005
Margin (%)

NA

1.35NA-----12.66

15.58

?
ROE (%)-----------30.82-----7.90-----?
DIV (S$)------------------------------0.01
EPS (S$)Pre-ListPre-List-3.150.01250.01980.01330.0224
Turnover (S$M)30.77331.16031.83717.78736.37819.04041.176
Cash + Bank Bal (S$M)??5.8137.8539.16711.84 10.976
Short Term Investment (S$M)?------
Current Liabilities - Bank Borrowings (S$M)??1.8362221.36
Long Term Bank Borrowings (S$M)??30.17227.727.716.79.8
NAV / Share (S$)??0.1023

0.2501

0.25960.25050.2656

Issued Shares = 264,975,700 @ $0.12 Par ; PE 11.8 @ $0.175

Note :
  1. NAV for 2004 and 2003 based on pre-list no. of shares. Would be 19.49cts and 7.68cts if based on post-list.
  2. EPS for 2004 and 2003 based on pre-list no. of shares. Would be 1.48cts and -2.37cts if based on post-list.
  3. FY05 is end-Aug


Substantial Hldgs

FY 2005 (Extracts)

Revenue

Gross Profit

Net Profit After Tax

Mid-Year 2005 (Extracts)

Revenue

Gross Profit

Net Profit After Tax

Bank Borrowings

Annual Report 2004 (Extracts)

Revenue
In FY2004, total revenue for the Group rose by 1.3% to S$31.3 million. Revenue for FY2004 was mainly contributed from hospital and ancillary services operations. The increased revenue was mainly from higher number of inpatient admissions which increased by 9% compared with FY2003. The Group also recorded a 4.4% increase in the number of deliveries and a 11.1% increase in the number of operating theatre cases over the previous financial year. The revenue contribution from specialised and other services business segment, post acquisition, was S$442,000.

Gross Profit
Our gross profi t increased by $3.0 million (or 30.2%) from $9.8 million in FY2003 to $12.8 million in FY2004. Despite an increase in revenue of 1.3%, cost of sales reduced by 12.1%. Gross margins improved from 31.7% to 40.8%. This was mainly due to lower direct materials and lower direct labour costs. Labour effi ciency improved due to streamlining of procedures and job scope and automation of administrative procedures.

Profi t before Tax
Our profi t before taxation improved by $5.7 million from a loss of $0.9 million in FY2003 to a profi t of $4.8 million in FY2004. Our hospital operations and ancillary services business segment recorded profi t before taxation of $4.6 million for FY2004 as compared to a loss before taxation of $0.9 million for FY2003. The improved performance is due to increased revenue from operations. The specialised and other services business segment recorded, post acquisition, a profi t before taxation of $218,000.

Moving Ahead
The outlook for the healthcare services industry in Singapore is very competitive, with many private and public healthcare services providers in the market. However, the Group is confi dent that it will continue to enjoy a steady stream of patients with its well established relationship with our tenant specialists and supportive accredited specialists. We believe that with our track record of over 25 years and our good working relationship with specialists, we will continue to be one of the preferred healthcare providers for women and children. As one of the leading providers for women and children’s healthcare services, our local growth strategy is to capitalise on the Government’s $300 million pro-family incentives announced in August 2004. We believe there will be a positive outcome with this initiative and we expect birth rates to increase in the coming year. Our other plans include the setting up of additional Thomson Women’s Clinics, extending parentcraft services and implementing new and innovative programs to encourage the use of our hospital’s facilities and services. Regionally, we aim to increase our presence by intensifying marketing efforts at key catchment areas for foreign patients. We will also be exploring opportunities for healthcare consultancy services, hospital management services and seeking out strategic regional partnerships. The Group intends to work closely with the Singapore Tourism Board to market its services to the region, in particular, Indonesia. We will organise road shows, public forums and seminars to showcase our capabilities and competencies with the aim to attract more foreign patients to our hospital.

Comments (Not Updated)

Conclusions (Not Updated)
Be warned, the above has been created to justify my recent additional buy of Thomson Medical shares. This will be intended for mid to long term hold as Thomson Medical looks like a potential good yield stock. Daily trading volume is very low, so it's not recommended for those who may need to sell in the short term as you may not be able to sell at a good price.

My Action (Not Updated)
Decide after FY05 results are out. Most likely sell half my hldgs if it hits above $0.20 for immediate 10% profits. My dream target price is aro' NAV, ie. $0.25. There'll likely be strong resistance at $0.22 (IPO price) as many who got fm IPO will look to exit, given its illiquidity and price drop after IPO. There's also a risk that results may not be up to my expectations. In that case, become long term hold :D

Share Price (Not Updated)

References

Disclaimer : Use the above at your own risk! We'll not be responsible for any losses incurred but you can give us credit if you make money :D


# posted by Anonymous @ 8/28/2005 11:48:00 PM
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