Health Management International Ltd - Riding the Wave?

Recently, a healthcare stock has been on the rise - Health Management International Ltd. (588.SI), more commonly known as HMI on the local stock exchange, closed at 0.64. Their current price is a far cry from the 0.48 at the start of September. The stock has been picking up speed recently, hitting a high of 0.65 today.

I've been looking to get into some trading after liquidating Sino Grandness last week - the loss wasn't too great, but an overall profit on any portfolio isn't a bad thing. I was delving into the healthcare sector for opportunities when HMI caught my attention. At the time, I decided to pick some up at 0.61.

Something brewing?

Health Management International Ltd. owns and operates the Mahkota Medical Centre in Malacca and Regency Specialist Hospital in Iskandar Malaysia. Currently, plans are to expand the Regency's medical block due to strong patient demand. Construction is set to begin in 2017, and is expected to take roughly 2.5 years to complete. The Regency has also begun advertising overseas, and has started to attract Indonesian patients. Mahkota's Nuclear Medicine division is pending a license to begin activities, and plans to add a new inpatient ward in 2017. With plans already in motion, the company is expected to keep growing as it moves into the future.

Their FY16 results were released in August. Revenue increased by 15.2% to MYR 397 million  as compared to last year, with the increase being mainly due to higher patient count and an overall increase in bill size. Their Net Profit After Tax, however, decreased by 14.8%, largely due to an increase in income tax expenses - a one-off recognition of MYR 9.4 million deferred tax assets and higher administrative costs contributed to this.

As at June 30 2016, HMI had a cash & cash equivalents position of MYR 78.9 million, up from the MYR 66.1 million at March 31 2016. This amount is almost double their position as at June 30 2015.

Due to healthy results, the company has announced a dividend of MYR 0.0075, with the ex-date being on 31 October 2016. HMI also recently announced an AGM to be held on the 24th of October, during which they will propose to renew their Share Buyback Mandate. The company had already approved the Mandate for the period of Oct 2015 to Oct 2016, during which they bought shares back at the 0.30 - 0.40 range.

At this juncture, my short-term target price is 0.685 - I believe this to be reasonably conservative, given the healthy news and dividend announcement. I am wary of chasing the price too far at this juncture.

Until next time.


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