[Health Management International] HMI SP (588.SI)
Action: BUY Entry: SGD$0.637
Target Price: SGD$0.74
Potential Upside: +14%
On 17th June 2019, HMI announced that there are ongoing discussions with an undisclosed third party pertaining to a potential share transaction. While discussions have not been finalised, we note that the stock is up approximately 20% since 18 May 2019. As much as the market are mostly reacting to news that are not finalised, we would like to provide another perspective based on long-term prospects of the Company.
First of, we note that HMI has a robust and credible panel of shareholders with controlling stakes in the firm. Shareholders include prominent figure Dr. Chin Koy Nam, which is held by Nam See Investment Pte. Ltd., her spouse and her children, and other stakeholders which totals up the stake to 68.8% (as per HMI, Bloomberg). To further strengthen the Company’s panel of shareholders, HMI has also conducted a placement to Heliconia Capital Management, which is a wholly-owned subsidiary of Temasek Holdings (as per Bloomberg).
According to the Company’s annual report disclosure on 18th September 2019, only about 31% of the total number of issued shares (excluding treasury shares) are held by the public. This is a rather close proximity to the 10% threshold of requirement for continual listing. After the announcement of ongoing discussions regarding a potential share transaction which resulted in a share surge, the Company is now just trading at a slight discount as compared to its peers (i.e. Raffles Medical, Healthway Medical). This could signal towards that any potential takeover would not be too large of a premium.
We still like HMI’s long term prospects with clear macro factors such as an ageing population being very much in its favour. Furthermore, things are set to look good as the Company sets to ramp up expansionary plans in Singapore and Malaysia.
We therefore, are of the opinion that HMI is a BUY with a target price of SGD$0.74.
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Heliconia Capital Management: https://www.bloomberg.com/profile/company/1291294D:SP