CFA Society Singapore
SINGAPORE (Apr 1): Phillip Securities is initiating coverage of Clearbridge Health (CBH) with a “buy”.
Phillip likes CBH’s business strategy of acquiring asset-light and fast-growing healthcare segments. After the acquisition, the group will then grow the businesses through expansion in capacity, network and capabilities.
CBH is currently trying to strengthen its foothold in the Indonesian and Filipino healthcare markets.
Both countries rank among the lowest in Asia in terms of the number of hospital beds and health professionals per capita and healthcare spending in both countries has been growing at around 9-10% p.a., says CBH.
Another key feature of its new Indonesian business is recurring revenue. Renal dialysis is a lifetime treatment, and CBH expanded from 15 hospitals at acquisition to 21 currently and another 13 under renovation.
To recap, CBH started in 2010 with a focus on the medical technology industry and made its first investment in Biolidics in 2011.
In 2017, CBH acquired Clearbridge Medical Group that owned two medical clinics. A year later, the group expanded into high growth markets of Indonesia, by acquiring a renal dialysis operator, and the Philippines, by acquiring a large medical facility.
The group then listed in Dec on Catalist at 28 cents each.
“There is a further proposal to acquire 12 clinical diagnostic laboratories in Indonesia,” says Phillip in a Monday report.
With only two clinics during listing, CBH has expanded into a well-diversified portfolio of asset-light healthcare businesses.
CBH’s focus is on healthcare segments with the fastest growth and to create an eco-system of businesses that can support each other and serve the complete lifecycle needs of a patient, says Phillip.
CBH’s business can essentially be split into three key segments, explains Phillip.
The Healthcare services and medical centres segment consists of two medical clinics in Singapore and Hong Kong, one aesthetic facility in Singapore and one medical centre in the Philippines.
The Healthcare systems consists pathology laboratories in Singapore and the Philippines with a proposal for 12 more laboratories in Indonesia and 34 more renal care centres in Indonesia.
In its strategic investments segment, CBH owns a 24.8% stake in liquid biopsy equipment and consumables developer and producer, Biolidics, with option to buy an extra 10.67%.
“Initiate with a “buy” recommendation and target price of $0.28. We used DCF valuation to capture the full benefit of CBH impressive growth over the next five years,” says Phillip.
As at 11.58am, shares in CBH are trading 0.8 cent higher at 15 cents or 30 times FY20F earrnings.