DMG Research October 27, 2009

SINGAPORE EQUITY
Investment Research

FY09 Results Review Private Circulation Only

HEALTHCARE
BUY Maintain
Lynette Tan
+65 6232 3895
THOMSON MEDICAL Price S$0.62
lynette.tan@dmgaps.com.sg CENTRE Target S$0.78
Terence Wong, CFA
+65 6232 3896 TWCC and Vietnam hospital to support growth
terence.wong @dmgaps.com.sg
Stock Profile/Statistics
Bloomberg Ticker THOM SP Thomson Medical’s FY(Aug)09 earnings came in within our expectations.
STI 2694.50
Issued Share Capital (m) 291.98
Revenue achieved was S$67.4m (+11.8%), on the back of a record number of
Market Capitalisation (S$m) 181.03 baby deliveries (8,907 babies) during the year and contribution from its Thomson
52 week H | L Price (S$) 0.63 0.37 Women’s Cancer Centre (TWCC). Net profit for FY09 grew by 14.2% YoY to
Average Volume (3m) ‘000 190.68
YTD Returns (%) 27.84
S$12.8m. Going ahead, we expect its TWCC and network of Thomson Women’s
Net gearing (x) Net cash Clinics (TWC) to continue driving growth. FY10 will see maiden full-year
Altman Z-Score 6.49 contribution from TWCC and the opening of another TWC, which would
ROCE/WACC 0.91
Beta (x) 0.74
contribute to growth. Its hospital project in Binh Duong, Vietnam (Hanh Phuc
Book Value/share (S¢) 38.12 Hospital) which is likely to commence in 3Q FY10, will also boost earnings
growth. Management declared total dividends of 2.8 S¢ per share (including 0.3
Major Shareholders (%)
S¢ special and 1.0 S¢ interim) for FY09. It is trading at a decent yield of 4.5%.
T Holdings Pte Ltd 19.98
Based on its peer average (ex-Parkway) of 16x, we arrive at a 12-month target
Harilela Hari Naroomal 34.75 price of S$0.78. Maintain BUY.
Cheng Wei Chen 16.21
Credit Suisse Group 5.01
Attracting patients by being innovative. Thomson Medical is the first hospital
in Singapore to launch an interactive and personalised pregnancy and baby
Share Performance (%) website. Through this, it aims to deliver more value to mothers-to-be and attract
Month Absolute Relative more baby deliveries at its hospital. To cope with the increasing demand for its
1m 5.1 2.6
3m 12.7 8.2
services, Thomson Medical will be adding two more operating theatres to its
6m 45.9 -2.3 current four. As it starts to market its TWCC across the region, contribution from
12m 53.1 -8.6 TWCC is expected to grow and boost overall Group performance in FY10.
Tapping on the growing popularity of traditional Chinese medicine (TCM),
6-month Share Price Performance Thomson Medical has also started offering TCM services to its patients. This
S$
0.65 would serve to complement its existing O&G services, allowing it to offer East
and West treatments to patients. We think that these initiatives would help boost
0.60
its branding and in turn, contribute to growth.
0.55

Hanh Phuc Hospital project slated to commence operations in 3Q FY10.

0.50
The construction for this hospital will be completed within the next two months.
0.45
Once in operation, Thomson Medical would receive hospital management fees
for running the Hanh Phuc Hospital, which would contribute to revenue and
0.40
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09
earnings growth.

Maintain BUY. We are estimating earnings of S$14.2m (+10.9%) for FY10. We

arrive at a 12-month target price of S$0.78, based on 16x FY10 earnings.

FYE 31 Aug (S$m) FY07 FY08 FY09 FY10F FY11F

Turnover 52.4 60.3 67.4 77.0 88.5
Net Profit 9.5 11.2 12.8 14.2 16.0
% chg YoY 39.8% 18.0% 14.2% 10.9% 12.5%
EPS (S¢) 3.3 3.8 4.4 4.9 5.5
DPS (S¢) 2.5 2.5 2.8 2.5 2.7
Div Yield 4.0% 4.0% 4.5% 4.0% 4.4%
ROE 11.1% 11.1% 11.6% 12.4% 13.0%
ROA 8.7% 9.0% 9.7% 10.3% 10.7%
P/E (x) 19.2 16.3 14.3 12.9 11.4
P/B (x) 2.0 1.7 1.6 1.5 1.4
Source: Company and DMG Estimates

DMG Research
See important disclosures at the end of this publication 1
DMG Research October 27, 2009

Year End 31 Dec (S$m)

Income Statement Cash Flow

2008 2009 2010F 2011F 2008 2009 2010F 2011F

Revenue 60.3 67.4 77.0 88.5 Profit Before Taxation 13.8 15.7 17.4 19.6
Cost of sales (33.7) (38.3) (43.6) (50.0) Non-cash Items 3.3 3.9 3.1 3.1
Other Operating Income 1.0 2.1 1.5 1.3 Changes in Working Capital (0.9) 2.8 1.8 1.7
Administration expenses (8.4) (9.8) (11.2) (12.8) Income Tax Paid (2.2) (3.2) (2..3) (3.0)
Other operating expenses (5.1) (5.5) (6.2) (7.3) Interest Paid (0.3) (0.1) (0.2) (0.2)
Financial income, net (0.3) (0.1) (0.2) (0.2) Net cash from operations 13.7 19.0 19.9 21.3
Profit Before Taxes 13.8 15.7 17.4 19.6
Income Tax Expense (2.6) (3.0) (3.3) (3.7) Acquisition of Fixed Assets (3.3) (5.3) (6.0) (6.0)
Minority Interest 0.0 0.1 0.1 0.1 Interest Received 0.2 0.1 0.3 0.4
Net Income 11.2 12.8 14.2 16.0 Others 0.0 - - -
Net cash from investments (3.1) (5.3) (5.7) (5.6)
Balance Sheet Dividends Paid (5.8) (7.3) (7.2) (8.0)
Proceeds from/(Repayment of)
2008 2009 2010F 2011F Loan (4.5) (1.4) - (0.1)
Others (0.0) (0.0) - -
Fixed Assets 109.0 106.9 109.6 112.2 Net cash from financing (10.3) (8.8) (7.2) (8.1)
Net increase / (decrease) in
Goodwill 0.1 0.1 0.1 0.1 cash 0.3 5.0 7.0 7.6
Non-Current Assets 109.2 107.1 109.7 112.3 Cash (beginning) 15.2 15.4 20.4 27.4
Inventories 1.0 1.2 1.2 1.4 Cash (end) 15.4 20.4 27.4 35.0
Trade and other receivables 5.4 4.3 4.6 5.3
Cash and cash equivalents 15.6 20.6 27.6 35.2
Current Assets 21.9 26.0 33.4 41.9 Ratios
2008 2009 2010F 2011F
Total Assets 131.1 133.1 143.2 154.3 Growth & Margin (%)
Revenue Growth 15.1 11.8 14.2 15.0
Bank borrowings 2.7 1.4 1.4 1.3 EBIT Growth 19.3 12.5 10.9 12.5
Deferred tax 1.6 1.7 1.9 1.6 EBIT Margin 23.3 23.5 22.8 22.3
Non-current liabilities 4.4 3.0 3.3 2.9 Pretax Profit Growth 21.1 14.0 11.0 12.5
Trade and other payables 13.2 15.1 17.3 19.9 Pretax Profit Margin 22.8 23.3 22.6 22.1
Obligations under finance
leases 0.1 - - - Tax rate 18.9 18.9 18.9 18.9
Provision for tax 2.5 2.3 3.0 3.3 Net Income Growth 18.0 14.2 10.9 12.5
Bank borrowings 1.4 1.4 1.3 1.3 Net Income Margin 18.6 19.0 18.4 18.0
Current Liabilities 17.2 18.7 21.6 24.5
Net assets 109.5 111.3 118.3 126.9

Minority interests 0.1 0.0 0.0 0.0 Revenue Breakdown

2008 2008 2009F 2010F
Hospital Operations and
Share capital 37.5 37.5 37.5 37.5 Ancillary Services 47.7 51.9 58.3 67.1
Specialised and Other
Reserves 72.0 73.8 80.8 89.4 Services 12.5 15.5 18.6 21.4
Shareholder’s equity 109.5 111.3 118.3 126.9 Total 60.3 67.4 77.0 88.5

Source: Company and DMG estimates

DMG Research
See important disclosures at the end of this publication 2
DMG Research October 27, 2009

DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

This research is for general distribution. It does not have any regard to the specific investment objectives, financial situation and particular needs of
any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser
before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor
accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to
change without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities, DMGAPS and its affiliates, their
directors, connected person and employees may from time to time have interest and/or underwriting commitment in the securities mentioned in this
report.

DMG & Partners Securities Pte Ltd is a joint venture between OSK Securities Berhad (a subsidiary of OSK Investment Bank Berhad) and Deutsche
Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange
Securities Trading Limited.

DMG & Partners Securities Pte. Ltd. (RCB Reg. No. 198701140E)

Kuala Lumpur Hong Kong Singapore Jakarta Shanghai

Malaysia Headquarters Hong Kong Office Singapore Office Jakarta Office Shanghai Office
OSK Investment Bank Bhd. OSK Asia Securities Ltd. DMG & Partners Securities Pte. Ltd. PT OSK Nusadana Securities OSK Asia Securities Ltd.
20th Floor, Plaza OSK 1201-1203, 12/F, #22-01 Ocean Towers Plaza Lippo, 14th Floor, Room 6506, Plaza 66
Jalan Ampang World-Wide House 20 Raffles Place Jl. Jend. Sudirman Kav. 25. No. 1266 Nanjing Road (West)
50450 Kuala Lumpur 19 Des Voeux Road Singapore 048620 Jakarta 12920 Shanghai 200040
Malaysia Central, Hong Kong Tel : +(65) 6438 8810 Indonesia China
Tel : + (60) 3 2333 8333 Tel : + (852) 2525 1118 Fax : +(65) 6535 4809 Tel : + (6221) 520 4599
Fax : + (60) 3 2175 3333 Fax : + (852) 2537 1332 Fax : + (6221) 520 4505

DMG Research
See important disclosures at the end of this publication 3