Healthcare specialist, Singapore O&G Ltd (SGX: 41X) took off to a flying start on its first trading day, with a closing price of S$0.635/share, a premium of 154% from its offer price. The counter has since continued to rally and ended the week at S$0.75/share.

Background

  • Singapore O&G Ltd, which stands for Obstetrics and Gynaecology is specialized in the field of women’s healthcare focusing on pregnancy care and delivery, female reproductive system, gynaecology and breast cancer.
  • The Group is incorporated as a holding company which fully owns and operates 8 clinics in 5 different locations across Singapore with 2 clinics in Parkway East Medical Centre; 3 clinics in Gleneagles Medical Centre; 1 clinic in Thomson Medical Centre; 1 clinic in Mount Elizabeth Novena Specialist and 1 clinic in Cassia Crescent.

Industry Coverage

  • The specialist healthcare industry in Singapore remains highly competitive with the Group competing with both public and private healthcare institutions. Some of the main competitors include Thomson Women’s Clinics; the Obstetricians and Gynaecology Centre; the O&G departments of restructured hospitals in Singapore and smaller private O&G groups.
  • In FY2013, 60.2% of pregnant mothers in Singapore had delivered their babies through private hospitals, having remained fairly stable from a year earlier at 61.3%.
  • There were approximately 39,700 live births in FY2013, with the Group delivering 1,060 babies in the same year. This accounts for around 4.4% of the industry market share.

Financial Profile

  • Revenue grew from S$8.1 million in FY2012 to S$13.5 million in FY2013, largely driven by the number of live births in Singapore and the increasing demand for delivery through private hospitals. The acquisition of Beh’s Clinic for Women, ST Surgery and Choo Wan Ling Women’s Clinic contributed to the revenue growth for FY2014.
  • Net profit margins averaged around 36.8% between FY2012 to FY2014.
  • Total assets of the Group stands at S$14.9 million, with about S$11.3 million in cash as at FY2014. The Group runs with 0 debt with majority of its liabilities constituting for trade payables.
  • Free cash flow between FY2012 to FY2014 has been steady, generating incremental operating cash flow from S$2.1 million to S$4.9 million over the past 3 years while requiring a relatively low capital expenditure of around S$322,000/year.

Use of IPO Proceeds and Dividend Policy

  • The use of proceeds through the IPO will be utilized for business expansions in terms of opening additional clinics with a long-term plan for regional expansion. Other uses will also be spent on hiring investment professionals and expanding the Group’s business offerings to include other healthcare services such as infertility and IVF services and paediatrics.
  • The firm has stated that it does not have a fixed dividend policy but expects to pay out 90% of its net profits for FY2015.

Value in Action

Healthcare stocks tend to command high valuations and Singapore O&G Ltd is no exception. As at 12 Jun 2015, the Group is closed the week with a price multiple of 38x FY2014 earnings.

 

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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.

 

 

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