In the context of Singapore’s ageing demographic trend, healthcare and medical services companies are expected to continue to grow in the coming years because of the increasing demands for specialized medical treatments and growing affluence in South-East Asia countries. Riding on this wave, Singapore’s TalkMed Group Ltd may be a trail-blazer in medical tourism.
TalkMed was listed in Catalist on 30 January 2014 and has since established itself as one of the market leaders in medical tourism in Singapore, with more than 60% of its patients from foreign countries for the past few years. The company has three subsidiaries, namely Singapore Cancer Centre Pte Ltd (SCC), TalkMed Vietnam Pte Ltd and Stem Med Pte Ltd. With 13 doctors in their arm, TalkMed’s niche businesses are in medical oncology services and palliative care services.
I like TalkMed’s business model because it is a scalable business which revolves around the provision of medical consultancy services and stem cell processing services. Through SCC, TalkMed doctors provide stem cell transplant and palliative care to the oncology patients. Its overseas investments include partnership with Thu Cuc International General Hospital to set up a medical centre providing medical oncology services in Hanoi. Arising from this collaboration effort, TalkMed Vietnam was established in March 2014.
In June 2015, TalkMed used part of its IPO proceeds to invest US$8.4 million for 30% stake in Hong Kong Integrated Oncology Centre Holdings Limited. This is a strategic move as the investment is a stepping stone for TalkMed into the China market. So for the long-term, the Hong Kong unit is likely to contribute positively to the bottom-line of the Group.
TalkMed derives its revenues mainly from medical consultancy services and stem cell processing services. Both services are regulated by Ministry of Health and thus this represents investment moats against potential competitors. Given that TalkMed has the niche expertise, capabilities and equipment, its business model is pretty much defensive.
According to TalkMed’s FY2015 annual report, the Group’s revenue has been growing steadily for the past six years. From 2010, revenue was at $48.3 million to $65 million in 2015. Profit for the past six years hovered around $31 to 37 million. FY2013 registered lower profit of $28 million, probably due to the expenses incurred for the overseas acquisition. Number of clinics grew from 6 to 8 and number of doctors increased from 8 to 13.
Another plus factor for TalkMed is that there is no debt and for the latest financial report for Q12016, net current assets amounted to $57.4 million, an increase from $48.2 million year-on-year. Net cash flow from operating activities was $13.1 million for the latest quarter. The Net Current Asset Value Per Share (NCAVPS) is $0.87. At the current price of $1.04, TalkMed’s share price seems over-valued.
TalkMed’s share price has run up from $0.20 at IPO to the current of $1.04 per share. This is an impressive performance for a Catalist stock within such a short time span of 2 years. Overall the business is well-managed with potential for growth, subject to management’s execution. Nonetheless, its market is too focused in the South East region and it will take time for the Hong Kong unit to grow.
I will set a 50% discount and enter this counter at $0.55. This is will be my safety margin in case of market correction. Not vested but monitoring this stock closely.
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SG Wealth Builder