Evaluating a healthcare service provider using 4 financial metrics

Article Highlights

• Trailing 12-month profit after tax grew by 3%
• Both ROE & ROA above 20% across the years
• Dr. Ang Peng Tiam is the single largest shareholder for TalkMed
• Sharp decline in total dividend per share for FY2020

TalkMed Group Limited (“TalkMed”) is primarily a premier provider of medical oncology, stem cell transplants and palliative care services, serving patients in Singapore and the region. Over the past few years, the Group has also expanded its footprint to other parts of Asia.

The Group’s Oncology services segment is engaged in the provision of oncology services to Parkway Cancer Centre, a division of Parkway Hospitals Singapore Pte. Ltd., Thu Cuc International General Hospital in Hanoi, Vietnam and Hong Kong Integrated Oncology Centre Holdings Limited.

Evaluating TalkMed Group Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2020, TalkMed’s revenue declined by 18.15% year-on-year to S$62.13 million. The fall in its topline was attributed to the COVID-19 pandemic, which led to a decrease in the number of patient visits across its various clinics.

Meanwhile, its profit after tax dropped by 43.56% year-on-year to S$18.51 million, mainly due to a decrease in revenue, an increase in share-based payments expense as well as higher impairment losses. These are partially offset by an increase in other income and a decrease in employee benefits expense and other operating expenses.

For its trailing 12-month financial performance, TalkMed’s revenue slipped by 3% to S$60.31 million as the COVID-19 pandemic took its toll in the company’s performance. Despite the slip in revenue, its profit after tax grew by 3.9% to S$19.24 million, aided by a lower share-based payments expense and income tax expenses.

Management Efficiency Ratio

For the past few financial years, both Return on Equity (“ROE”) and Return on Assets (“ROA”) has been on a downward trend. This can be explained by the fall in its profit after tax and the higher shareholder equity.

In spite of the declining trend, both metrics continues to be above 20%, which shows that TalkMed is operating at a rather efficient level.

Meanwhile, TalkMed’s cost to revenue jumped by 6 percentage points to 39.22% in FY2020 mainly due to the higher operating expenses involved.

Ownership

The single largest shareholder for TalkMed is Dr. Ang Peng Tiam, who has a 65.0% stake in the company. He is currently the Executive Director and Chief Executive Officer for TalkMed. He is also the Medical Director and senior consultant of Parkway Cancer Centre at Mount Elizabeth Hospital.

The second and third largest shareholder for TalkMed are Dr. Khoo Kei Siong and Dr. Teo Cheng Peng, who has a 7.5% and 7.4% stake in the company respectively. Dr. Khoo is the current Executive Director and Chief Operating Officer for TalkMed while Dr. Teo is a senior consultant, Haemtologist at Parkway Cancer Centre.

Dividend

With the lower earnings in FY2020, TalkMed’s total dividend per share decreased by 41.3% year-on-year to just 1.35 Singapore cents. This translates into a dividend payout ratio of 78.1%, as compared to 84.6% a year earlier.

The decline in the payout ratio could mean that TalkMed is trying to conserve cash on hand to ride out this difficult period.

Based on its current share price of S$0.39, this translates into a dividend yield of 3.4%.

Conclusion and Prospects

TalkMed’s financial performance in FY2020 has been adversely impacted by the ongoing COVID-19 pandemic with lower visitations to their clinics. Investors will have to continue to keep a lookout for any meaningful turnaround in the medium term.

In terms of management outlook, given its Singapore’s operations very much dependent on the patients from the Southeast Asian region, the ongoing travel restriction will continue to have an impact. Similar trends can also be seen in their Hong Kong’s business operations.

Nonetheless, the full extent of the COVID-19 situation on their operations in Singapore and Hong Kong cannot be ascertained at this point. TalkMed will continue to monitor the COVID-19 situation closely and will provide further updates when any material developments arise.

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