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Thomson Medical Research: Defensive 3.5% Yield

Note: All  figures for this article can be found in this google spreadsheet here.

I was informed that Thomson Medical have release a rather good set of results recently:

Thomson Medical Centre on Thursday said its half-year profit rose 22 per cent on-year to S$7.2 million. Revenue for the six months to February rose about 18 per cent to some S$38 million. Thomson Medical said the improvement in its performance was driven by higher deliveries, inpatient admissions and demand for outpatient services.

It also saw higher revenues from its Thomson Women’s Clinics, Thomson Women Cancer Centre and Thomson Paediatric Centre.
Going forward, Thomson Medical sees its growth drivers coming from its satellite clinics, and new paediatric and women’s cancer centres.

On the regional front, the soft opening of its hospital consultancy and management project in Vietnam’s Binh Duong Province has been delayed to September. But Thomson Medical said the delay will not affect its financial results this year. The Group said its second hospital consultancy project in Hanoi, Vietnam, will commence once a suitable site has been identified.

Allan Yeo, group chief executive, said: “We will probably be one of the so-called chain of hospitals for women and children, probably one of the larger chains, and we intend to bring our expertise with us to Vietnam, and to work with our Vietnam partner to look at the local culture, and to deliver the best of both worlds.”

In the second quarter, Thomson Medical’s net profit rose 19.1 per cent to S$3.64 million on revenues of S$18.9 million.

I think alot of people like the healthcare business such as Healthway, Raffles Medical, Thomson Medical, Parkway, Parkway Life REIT and First REIT primarily because

  1. they have a economics model that tends to be more resilient during the downturn. Even in bad times, the population would not cut down on this expense compare to some other discretionary spending
  2. aging population. As Singapore’s population gets older, there is probably an increase demand in these services
  3. premier medical hub. Singapore being one of the favorite destination for rich south east asians for advance medical treatment.

However, do note that each of them have their own characteristics that investors should be well aware of.

Thomson Medical started off as a private hospital providing women and children’s hospital services in Singapore.  They are beginning to diversify regionally to take advantage of their expertise in these field.

Being in such a niche segment, their growth is tied very closely with the birth rate of Singapore probably. I have to say i am not an expert in this area so i can’t tell you folks what is the outlook for Singapore’s birth rate.

However, the growth in this area may be likely due to increase in expatriates and permanent residents giving birth in Singapore.

Aside from this, how do they measure up as a growth or dividend stock?

Revenue and Profits have done pretty ok but its does not cause big surprises on the upsdie.

You would notice that the cash holdings is growing, this is because they been adding free cashflow to it. With this free cashflow it dwarfs their long term debt as it more than covers for their capex.

Their Profit Margins and Operating Cashflow Margins are pretty good.

Lets see the cashflow. Operating Cashflow have been increasing steadily for the past 4 years. Capex have remain relatively low.

The free cashflow more than covers the low dividend yield. However, we  don’t see a growth in dividend payout.

The yields have never been more than 4%. What we look for is whether there is a chance that an opportunity comes along to boost sales and boost bottom line. This will in turn boost dividend payout. But that is not the case here.

In terms of how much they can pay out, based on the figures give they can pretty much pay out near 5-6% yield.


Thomson Medical’s share price have been on a good run. If there is a server drop due to systematic reasons, i may take a starting position in this. As of now the yield is too low for me to be vested.


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Tuesday 13th of July 2010

Hi Royston, just being curious..

What kind of investment strategy do you think TMC is adopting? and Is the company investing enough to safeguard future profitability?

The fixed asset turnover ratio is facing a downward trend. Does it mean that investment is inadequate? are there any particular reasons why investment is structured in this manner?


Sunday 11th of April 2010

Hey Drizzt,

Given the choice, i would definitely choose Thomson Medical over KK. :)

Honestly, i've heard lots of bad feedback about the service quality at KK. And i'm pretty satisfied with what i personally experienced at Thomson, since my wife delivered there last year.

I haven't done a side by side comparison of the cost, but i don't think it cost alot more given the same type of room.


Sunday 11th of April 2010

Haha. you should do a cost review of how much you spend at Thomson for delivery. It would educate us alot.

best regards.


Sunday 11th of April 2010

Hi Royston and all,

Given the choice would you rather your spouse deliver in KK Hospital or Thomson Medical?

Best Regards


Sunday 11th of April 2010

Hi Royston,

nice to see you here and i do visit your blog here and there. I got interested in this when Grandmaster89 referred to me. I usually dun look at EPS but more operating cashflow growth. Only in cases where the business environment is such that the business does not generate operating cashflow growth do i switch to other means.

essentially, whether it is EPS or NOPAT, a good company will be able to grow it consistently.

right now Thomson's track record is very short for us to judge


Sunday 11th of April 2010

Hi Drizzt,

Just to share that i'm vested in this counter as well. Decided to take a look at it after my wife delivered at thomson. ;)

I'm wondering how come you don't look at EPS in your analysis. I'm pretty impressed that they've been able to consistently grow their EPS through the years.

Their business model is also expanding, by branching out into many specialised women & children care services as well as building a hospital in vietnam. Their branding is very good as well compared to other hospitals for deliveries, which i think explains their increasing birth deliveries despite S'pore's decreasing birth rate.

Personally i'm pretty keen to add to this counter if the price falls.


Sunday 11th of April 2010

Hi Royston,

on the point of building hospital i think its more of business development work. I am not sure about the margins for this business but there is an arrangement to run it should it be successful.

which is better provide consultancy or run it? the latter has more risk but if done well could grow.

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