Disappointing 1H22 performance; cut FY22F/23F earnings by c.30% and rating to HOLD
Results highlights
- Revenue fell 4% y-o-y to S$90.9m in 1H22 from S$94.6m in 1H21, mainly attributed to the 28% decline y-o-y in revenue from the medical laboratory and dental equipment & supplies segment
- Employee benefits expense and depreciation of right-of-use assets increased 20%/22% y-o-y
- Profit attributable to shareholders declined 45% y-o-y to S$9.9m in 1H22 from S$17.8m in 1H21, partially due to the one-off S$4.4m gain on disposal of Aidite in 1H21
- Excluding the one-off gain, profit attributable to shareholders declined c.34% y-o-y
- No dividend was declared for 2Q22 as the Group plans to conserve cash for corporate activities and future expansions and guides that they will be paying down bank loans in 3Q22 and 4Q22. (Dividend in 1Q22: 0.04 Scts per share; Dividend in 2Q21: 1 Sct per share)
Forecasts revision and recommendation
- Cut FY22F/23F earnings by c.30% to S$22.7m/S$26.0m to factor in 1) lower projections for new clinic openings in Singapore to roughly 10 per year from 15; 2) slower ramp up to profitability for the new clinics; and 3) softer forecasts for the Acumen Diagnostics business as demand for COVID-19 testing drops significantly in Singapore
- Revise dividend payout ratio to a conservative 50% for FY22F-24F from 4 Scts per share previously
- We lower our target price to S$0.53 based on sum-of-the-parts (SOTP) as we roll forward to FY23F valuations, implying 20x FY23F PE
- Downgrade to HOLD from BUY