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Healthway Medical: 20c target.

Thursday, September 16, 2010

Standard Chartered has suggested a target price of 20c for Healthway Medical. They arrived at this target price after highlighting a slew of difficulties the company faces:

1. Opening chain of clinics in China and setting up specialist center in Singapore are facing challenges in execution.

2. The group has not delivered good execution in its specialist services in the past and has limited experience of organic expansion.

3. Mass exodus of prominent specialist doctors from Healthway’s employment is also troublesome. 


4. Cost pressure mounting due to aggressive expansion.

I am almost 100% divested and I am still waiting for its share price to fall to a more reasonable level before I load up once more because if the management does deliver on its expansion plans, the company's share price would fly. At the current price, valuation is simply astronomical.

Standard Chartered's target price of 20c implies a PE of 36x!  This is almost as ridiculous as Q&M Dental Group's valuation when they first listed!  Please bear in mind that my considerations here are based on FA.  There is no accounting for sentiments.

Related post:
Healthway Medical: Second quarter results.

10 comments:

JT said...

great site! didn't know there were so many SG stock blogs till I saw yours in blogrankings. Cheers!

AK71 said...

Hi JT,

Thanks for visiting. Come back again soon. :)

ezinvest said...

We're looking at the same thing. Not Bad! Healthway is something I've been tempted to enter for quite some time as Peter Lim is the sign of confidence for me.

With regards to PE, have you read the 3 questions that counts by a man called Fisher. He has debunk the PE myth.

AK71 said...

Hi ezinvest,

You know how people want to invest in the same things Warren Buffet invests in or, maybe, in the local context, it's Oei Hong Leong? Now, we have Peter Lim too. Can we really make money like this? I don't know. I'm sure these gurus make mistakes too, right?

It is somewhat like a self-fulfilling prophecy to me. W buys, everyone rushes in to buy, price is pushed up and W is proclaimed a genius? Am I too cynical? Maybe. :)

The PE myth? Would you like to share it here with us? Or have you blogged about it? If so, please provide the link. I would be interested to read it as do many others, I'm sure. Thanks! :)

Wong said...

Hi AK71,
At which price will you load up more on Healthway?

AK71 said...

Hi Wong,

I was wondering if someone might ask me this question. :)

On 24 Feb, I said "EPS would be about 20% lower and PE is less attractive. Fundamentally, at 16c, its PE would be 20x once all the proposed share placements are approved and effected. This valuation is similar to RMG and I would, therefore, consider 16c per share as a fair value for Healthway Medical from a fundamental perspective. Buying at any higher price would be a bet on the future earnings of Healthway Medical which cannot be determined with any great amount of certainty at this point in time."

See: http://singaporeanstocksinvestor.blogspot.com/2010/02/healthway-medical-updated-valuation.html

My opinion has not changed and I view the share price of 16c as expensive especially when Healthway Medical's EPS has actually suffered more than expected in recent past and at the current price, PE is 30x, much higher than the 20x back in February 2010. Would I buy now? No.

At what price would I buy? This is a difficult one to answer, realistically. If its EPS improves significantly in time, 16c might be a fair entry price. If the price drops significantly, 13c could be acceptable given the current weak performance. Sorry, but no straight answer once again. ;)

CL said...

13c for me. :)

AK71 said...

Hi CL,

Still interested in Healthway Medical? Haha ;)

13c? Really? I might just join you. ;p

AK71 said...

The fight for control over one of Singapore's largest private clinic operators is heating up.

Hong Kong-listed Lippo and Lippo China Resources, controlled by Indonesia's Riady family, on Tuesday launched a cash offer to raise their stake in Healthway Medical Corp (HMC) at 4.2 cents a share.

Source:
http://www.straitstimes.com/business/lippo-launches-offer-to-take-control-of-healthway-medical-at-42-cents-a-share

I still have some free of cost shares left in this.
Has it been so many years? Time flies.

AK71 said...

Wawa Sun:
Are going to tender your HMC to Lippo or keep it as the 4.2 cent is very low?

AK:
I dunno. At 4.2c, it is worth only a few thousand $. I have forgotten about this until the IHC uproar. Hmmm... I too lazy to do anything. Maybe, I will just keep it.

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