Investors should always be keeping an eye out for recent developments and news concerning companies that they are investing in.
New announcements from companies often affect the market’s sentiments on that stock and can vary the stock price drastically.
UOB Kay Hian Research (UOBKH) has recently been in touch with the management of these two companies and have highlighted some good news from them that investors should take note of.
Health Management International
UOBKH hosted the management of Health Management International (HMI) at a non-deal roadshow in Kuala Lumpur and received positive news about Malaysia’s medical tourism outlook.
With a weaker ringgit, Malaysia has been attracting more foreigners; that is further boosted by Malaysia’s Healthcare Tourism Council’s effort to promote the country as a medical tourism hub.
Foreign patient load growth was higher than that of local patients, with foreigners making up about 23% of the total patient volume.
Given that foreigners typically spend more on more complex procedures, spending about 1.5 times more than the locals, revenue has much room for growth.
Furthermore, the government is also trying to target other countries such as China, Myanmar and Vietnam to attract more patients to come into Malaysia for medical tourism besides Indonesia, which makes up the bulk of the foreign patients.
HMI also has much capacity left to be utilised; its Mahkota hospital and Regency hospital are not at its maximum capacity and UOBKH sees plenty of space for organic expansion.
Investors who are concerned about the potential competition facing HMI should note that currently, Johor is still underserved regarding hospital capacity, with a 1.6 bed to population ratio which is below the national average in Malaysia of 1.9.
Hence, any new entrants will likely not pose a significant threat to HMI since it will take some time for the new hospitals to establish themselves and compete on the same level.
A potential source of concern is the low trading liquidity of HMI. To counter this problem, management should consider offering scrip dividends, or even consider a stock split to make the stocks more accessible for retail investors.
Until then, investors will have to bear in mind the low trading liquidity of this stock when entering into the market.
Currently, UOBKH is confident of the future developments of Malaysia’s status of becoming a medical hub and believes that HMI is well positioned to benefit from such developments.
Therefore, UOBKH maintains a BUY call on Health Management International Limited (SGX: 588) with a target price of $0.83.
At its current share price, Wheelock Properties seems to be trailing behind that of its competitors like City Developments, and trading at a deep discount to NAV with no outstanding debt.
At its current net cash position with no outstanding debt, Wheelock has an acquisition headroom of $2 billion for a net gearing level of 50%, making it well poised for profitable acquisitions, which may be from an en bloc sale.
As Singapore’s property market starts to recover, Wheelock will be reaping the benefits of having a primarily Singaporean portfolio since 80% of its value comes from Singapore.
Some potential upcoming projects include a joint development of Orchard Road properties with its strategic partner HPL.
They could be working together to purchase the URA car park between Four Seasons Hotel and Wheelock Place to redevelop the entire place and connect it to Orchard MRT via Wheelock Place.
If this deal pulls through, it can potentially be worth $1 billion in value accretion.
However, this plan is primarily dependent on the government’s plan for the URA car park, and will only gain more clarity around 2020 when the Thomson line is nearing completion.
Over the long term, Wheelock has the potential to be a privatisation target with Wheelock and company owning 75.8% of Wheelock Singapore.
Given that it is currently trading at a deep discount to its revised net present value, UOBKH predicts that if it falls to 50% to 60% discount, the Woo family will most likely consider privatisation.
If that occurs, it will increase the share price and give investors a one-off increase in income.
Currently, UOBKH maintains its BUY call for Wheelock Properties Limited (SGX: M35) with a target price of $2.33, which is a 15% discount to its revised net asset value of $2.74 per share.