Thursday, 16 July 2009

Singapore Medical Group Limited


Singapore Medical Group Limited is placing 25.6m shares (comprising 8.55m new shares and 17.05m vendor shares) at 21 cents each for a listing on Catalist. Once again, Primepartners have teamed up with DMG to launch this issue. Prime has also helped list its peers Healthway back in June 2008.

The Company is a healthcare industry and provides specialist healthcare services. It is established in the fields of LASIK procedures and sports medicine. Revenue has grown from $4.3m in FY2006 to $30.1m in FY2008 but net profit has been more "volatile", increasing from $1.3m in FY2006 to $8.1m in FY2007 before dropping to $5.0m in FY 2008. The offer will close on 21 July 2009 but is via placement only. The market cap post IPO will be $30.6m. EPS based on the enlarged share cap and FY2008 net profit assuming the Service Agreements have been effected will be Singapore 2.87 cents and that will translate into a PE of 7.3x historical.

There are not much IPO proceeds to talk of, the majority of the amount raised will be paid to the owners of the company and after deducting the IPO expenses of $1.063m, there will only be $0.7m. I feel that the IPO expenses should be borne on a "pro-rata"basis since the majority of the proceeds raised is going to the vendors. The company intends to pay an interim and final dividend approximately 20% of the consolidated net profits attributable to shareholders for FY2009 and FY2010. After the IPO. the public will hold 17.6% shares and is likely to be thinly traded. It is interesting to note that 3 directors will be paid more than $250,000 per annum for FY 2009 while only 1 received such remuneration previously in FY 2008. The company also has a few family members working in the firm but their pay will be reviewed annually to ensure it is "fair".....hmmm..

Anyway, while i like the way which the company is being positioned (to earn money from the "ai swee" people who goes for asthetic surgery), i think the company is fairly valued at its IPO price. However, it is trading at more attractive valuations then Healthway.

4 comments:

Anonymous said...

I tried applying for this ipo of smg just now bt the options wasnt there. Any idea why? Regards,Gabriel

2Y Capital said...

Hi Gabriel, this is because this is a "catalist" listing and the sponsor has made it a "placement-only" IPO. As such, there is no public tranche.

Anonymous said...

"i think the company is fairly valued at its IPO price. However, it is trading at more attractive valuations then Healthway. "
--- jus curious how you valued SMG compare to healthway (P.E?), and what is the NTA per share for SGM in this case?

"LASIK procedures and sports medicine"---can the revenue growth in these areas be somehow restricted, considering LASIK is more "Cosmetic" than traditional medical care (necessity for mass public).

gameysf said...

Agree with u that Healthway medical's IPO is a major flop... It does seem a bit unethical for HW since it makes HW look mercenary or they seems to rip off shareholders who believe in them...

But on one hand, because of the overvalued IPO it raised, it allows HW to grow at a fast pace...

Though sg medical is the leader in LASIK in sg, did u realise that over the years, prices of doing a lasik surgery has been decreasing? That means diminishing profits...

HW has been smart nt to have lasik division in sg but on the other hand, have a HW China to offer lasik services because the cost is lower in china and profit margin is higher.

As HW plans to add in ten new specialists in Q4 2009 and Q1 2010, as well as grow its primary GP clinic to 120 clinics in three yrs, i think this company is growing fundamentally stronger each day... The H1N1 is another major boost plus they already established a partnership with Crane Medical in Shanghai...

For fundamental reasons, i invested in Healthway.... i believe in near term, its valuation is around 17 to 20 cents.

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