ISEC Healthcare is a Singapore Exchange (SGX)-listed medical eye care service provider specialising in the fields of cataract, and refractive surgery (including laser-assisted situ keratomileusis (LASIK)), vitereoretinal diseases, corneal, and external eye diseases, glaucoma, uveitis, oculoplastics, facial cosmetics, and aesthetics surgery, adult strabismus, and pediatric ophthalmology.

ISEC Healthcare has surgical centres in most metropolitan areas in Malaysia, including Kuala Lumpur, Penang, and Malacca.

Financial Performance

ISEC financial performance

Source: SGX StockFacts, Company’s Financials

ISEC Healthcare’s revenue has been trending upwards since FY14. In the latest 1Q19, the company generated revenue of $9.9 million, representing a year-over-year (YoY) rise of approximately 3.2 percent from 1Q18.

Both the company’s operating and net income margins (excluding extraordinary items) remained steady since FY16. In the latest quarter the company generated operating and net income margins of 29.4 per cent and 22.3 percent respectively.

Cash Balances and Leverage Levels

ISEC Cash

Source: SGX StockFacts, Company’s Financials

ISEC Healthcare’s latest quarter showed healthy cash balance of approximately $28.6 million. The company incurred no significant interest-bearing debt, except for some leases as of 1Q19, comprising current lease repayable in one year ($1.5 million) and repayable after one year ($4 million) as shown below:

isec debt

Source: Company’s Financials

The net cash from operating activities (CFO) in 1Q19 stood at $2 million, little changed as compared to the 1Q18 CFO of approximately S$1.90 million.

How are the valuations of ISEC Healthcare compared to other peers in the sector?

ISEC table

According to latest SGX Research, and the table shown above, ISEC Healthcare is so far ranked as one of the highest dividend-yield stock compared to most of its public-listed healthcare peers.Source: SGX StockFacts, Bloomberg (May 02, 2019)

This is quite rare as most investors would typically associate the local healthcare sector as a growth industry. Moreover, ISEC Healthcare’s historical twelve-month price-earnings (P/E) multiple of 18.8 times is so far ranked the second-lowest, as compared to HC Surgical Specialists (11.1 times). ISEC Healthcare’s P/E multiple is also lower than the industry average of 29.2 times.

Tough Business

While ISEC Healthcare’s overall company fundamentals remain relatively competitive as compared with its other public-listed peers. However, the stock is a rather illiquid counter given its low trading volume. Moreover, the eye-care business is relatively competitive, and there are no short of various small practices that offer similar and probably cost competitive services.

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