SINGAPORE (Jan 8): CIMB is maintaining its “hold” call on TalkMed Group with a lower target price of 68 cents from 92 cents previously, after cutting FY17-19F earnings per share (EPS) estimates by 18-21% to factor anticipated earnings losses from the recent suspension of the group’s key doctor and CEO, Ang Peng Tiam, on the grounds of professional misconduct in 2010.

See: TalkMed CEO Ang Peng Tiam handed 8-month suspension for professional misconduct in 2010

Following the announcement of Ang’s eight-month suspension starting from end-July in 2017, TalkMed posted a 17.2% decline in 3Q earnings to $7.1 million from $8.6 million a year ago, and said it expected Ang’s suspension to have a material impact on its revenue and earnings going forward.

See: TalkMed's 3Q earnings fall 17% to $7.1 mil

In a report on Sunday, lead analyst Ngoh Yi Sin underscores TalkMed’s reliance on Ang – who contributed to about 55% of the group’s FY16 revenue – as an inherent business risk that continues to serve as a near-term overhang.

Nonetheless, Ngoh believes the group is on track to achieve breakeven in FY18F as its patient load ramps up from its overseas presence, namely via its investments, Hong Kong Integrated Oncology Centre (HKIOC) and Integrated Imaging & Endoscopy Diagnostic Centre (HKIEDC), in partnership with TE Asia Healthcare Partners.

Additionally, TalkMed plans to venture into China in partnership with Beijing New Hope Hospital Management by the means of management contracts in Chongqing and Beijing, which the analyst believes could lead to the cross-referring of patients to Singapore.

“While overall positive on these overseas projects, we opine that this asset-light strategy will take time to build sufficient scale for earnings diversification, but would not put its dividend payout at risk,” notes Ngoh.

“Downside risks are market share loss and slowing medical tourism. Re-rating catalyst could come from stronger expansion into North Asia,” she adds.

As at 11.28am, shares in TalkMed are trading flat at 70 cents, or 11.9 times FY18F price-to-book value.