Background: Healthway Medical has the largest network of private medical centres and clinics in Singapore. It owns, operates and manages up to 100 medical centres and clinics. It also has a fast expanding network in Shanghai, China.
Recent development: Healthway recently completed the issue of 231m rights shares (issue price: $0.075), which were listed in June this year. Net proceeds of $17.05m were raised and this would be used to fund the group’s expansion in China, Singapore and ASEAN, and also for working capital purposes.
Key ratios…
Price-to-earnings: 51.9x
Price-to-NTA: 5.0x
Dividend per share / yield: Nil
Net cash/(debt) per share: S$0.005
Net gearing: 5.3%
Share price S$0.083
Issued shares (m) 2,094.43
Market cap (S$m) 173.84
Free float (%) 45%
Recent fundraising activities 231m rights shares at $0.075 per share; net proceeds $17.05m
Financial YE 31 Dec
Major shareholders Fan Kow Hin (21.2%), Aathar Ah Kong (9.62%), Jong Hee Sen (7.03%)
YTD change -47.37%
52-wk price range S$0.06-0.177
Our view
Pickup in business still slow. After seeing a sharp fall in FY10 profits following the exodus of several prominent specialists, Healthway is determined to restore profitability to previous levels. Its 1H11 results showed a 69.1% YoY jump in net profit to $2.5m, but corresponding revenue fell by 6.5%. The lower revenue and pickup in profitability arose from the closure of non-profitable clinics in 4Q10. While there was a positive growth, pickup remained slow and Healthway would need more time to rebuild its business.
Aggressive growth initiatives. Healthway has planned several aggressive growth initiatives and successful execution could pave the way for a comeback. These include growing its specialist services, including the new Healthway Specialist Centre in TripleOne Somerset, and China expansion plans, including a 25% interest in a JV to develop medical facilities in the country. However, execution risk remains given its limited experience in some of these areas.
Valuation not yet enticing. While share price has fallen by 47% YTD, valuation is not yet enticing in our opinion, if current results are used as a gauge for the full-year performance. The stock is trading at FY10 PER of 51.9x and consensus FY11 PER of 20.8x.
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