Dissecting a Healthcare Service Company

Article Highlights

• Trailing 12-month revenue down by 34%

• Negative free cash flow across the years

• Rising liquidity ratio since FY2018

• Peter Lim Eng Hock is the single largest shareholder

Thomson Medical Group Limited (“Thomson Medical”) is one of the leading listed healthcare players in the South-East Asian region with operations in Singapore and Malaysia. It owns and operates the iconic Thomson Medical Centre and a network of specialist medical clinics and facilities providing outpatient women and children healthcare services and service offerings in diagnostic imaging, health screening, gynaecological oncology, dentistry, specialist dermatology, traditional Chinese medicine, musculoskeletal and sports medicine, and medical aesthetics.

The Group’s operations in Malaysia under TMC Life Sciences Berhad is a multi-disciplinary healthcare company listed on Bursa Malaysia. It operates Thomson Hospital Kota Damansara, a tertiary hospital located in Kota Damansara, and the award-winning TMC Fertility Centre which is the industry leader in assisted reproduction in Malaysia.

Evaluating Thomson Medical Group Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2020, Thomson Medical’s revenue (Blue Bar) grew by 42.63% to S$327.79 million. The rise in revenue was mainly due to the change in the financial year from December to June.

For the period ended 30 June 2020 (“6M FY2020”), there was a 12.3% decrease in revenue to S$98.0 million, attributable to the decrease in overall patient loads due to weaker contributions from the specialist segment in Singapore and the hospital and fertility operations in Malaysia.

One important point to note is that Thomson Medical slipped into a loss (Purple Bar) of S$96.17 million in FY2020. It is mainly due to the one-off non-cash impairment of S$93.4 million recorded on the 9.23-hectare freehold land located within the Iskandar Development Region in Johor Bahru, Malaysia.

For its trailing 12-month financial performance, its revenue declined by 34.52% to S$214.62 million as overall patient loads in both Singapore and Malaysia suffered due to the COVID-19 lockdowns. That said, lower operating expenses helped pull back the losses slightly to S$87.32 million.

Free Cash Flow

Since FY2018, Thomson Medical has registered a rising negative free cash flow of S$687,000 to S$32.81 million in FY2020. The rising negative free cash flow can be seen from a higher capital expenditure across the years, which is outpacing the growth in net cash from operating activities.

However, there was a sharp decline in negative free cash flow for its trailing 12-month period to S$17.97 million. The main reason was due to the significant drop in capital expenditure for the financial period mentioned above.

Liquidity Ratio

In terms of liquidity ratio, Thomson Medical’s current ratio has been on an uptrend since FY2018 of 1.41 times to 3.88 times in FY2020. This suggests that it has more than enough current asset on hand to cover its current liabilities easily.

Similar trends can be witnessed from Thomson Medical’s cash ratio. For FY2018, its cash ratio stood at 0.39 times and has improved to 2.00 times in FY2020. This implies that the company’s cash on hand is more than enough to cover its existing liabilities.

Ownership

The single largest shareholder for Thomson Medical belongs to Mr. Peter Lim Eng Hock, who has an 88.25% stake in the company.

Other notable shareholders include Mr. Ng Ser Miang, who is the Chairman, Non-Executive and Independent Director of the company and Mr. Ong Pang Liang, who is the Independent Director in Thomson Medical.

Conclusion and Prospects

Despite slipping into losses for FY2020 due to a non-operational impairment, Thomson Medical remained relatively solvent given the strong liquidity ratio. However, investors still need to keep a lookout for any improvement in its free cash flow and overall financial performance.

In terms of prospects, Thomson Medical has mentioned that the Group expects to launch its first dedicated specialised learning centre for children with developmental delay as part of the Thomson Kids subsidiary platform in the 3rd quarter of FY2021.

Moving further into the digital space, Thomson Medical also launched Thomson X - a platform that will oversee its technology roadmap through partnerships with various HealthTech start-ups and international associations, to deliver innovative health and wellness solutions to the company’s existing services and partners to future-proof its business model.

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