SINGAPORE (Nov 15): <strong>OCBC Investment Research</strong> is ceasing coverage on Health Management International (HMI) due to an internal reallocation of its resources.

In a Tuesday report, lead analyst Joseph Ng says the group’s 1Q18 results came in largely in line with expectations, with its PATMI of RM13.8 million forming 23.9% of FY18 forecasts partially due to the consolidation exercise that occurred earlier this year, resulting in 100% of the group’s net profit becoming attributable to shareholders.

<hr/><a href="https://www.theedgesingapore.com/health-management-says-1q-earnings-more-double-45-mil-consolidation-and-strong-ops-performance">See: Health Management 1Q earnings more than double to $4.5 mil </a><hr/>

The OCBC analyst is positive on HMI’s recent announcement of its intention to induct Heliconia Capital Management, a wholly-owned subsidiary of Temasek, as a 2% shareholder of the enlarged capital in the group following its impending $11 million share placement.

“This move allows HMI access to Heliconia’s network and resources as the group executes its growth strategies… Looking forward, we note that [HMI’s] management remains focused on tapping the rising demand for healthcare across the region.” says Ng.

Regarding the group’s expansion initiatives at Mahkota and Regency, the analyst is in the view that these are aligned with Malaysia’s national economic blueprint, where healthcare travel has been identified as one of the National Key Economic Areas in pushing the country towards a high-income nation by 2020.

Meanwhile, <strong>Phillip Capital</strong> maintains its “buy” call on the stock with an unchanged target price of 83 cents after the group’s 1Q revenue and PATMI met 24% and 26% of the research house’s FY18 estimations, respectively.

In a Wednesday report, analyst Soh Lin Sin notes that HMI’s foreign patient load has grown at its highest pace since FY15 in the recent quarter under review, with Malaysia “picking up the slack from Singapore’s structural slowdown” in medical tourism due to the former country’s more competitive pricing.

She also thinks the group’s aim of paring down 50% of acquisition debt by Dec 2017 is achievable, given its strong operating cash flows and declining gearing ratio.

“We maintain our view that HMI will benefit from the socioeconomic tailwinds arising from public and private initiatives to improve infrastructure and regional connectivity; increasing domestic insurance take-up rate; ageing population; and cost competitive pricing compared to regional peers,” says Soh.

As at 10.31am, shares in HMI are trading 1 cent lower at 70 cents, or 7.56 times Phillip Capital’s FY18 book value.

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