Maybank Securities has downgraded its call on Thomson Medical Group (TMG) to “hold” from “buy” with a slightly lower target price of 5 cents from 6 cents previously.
In its Feb 13 report, analyst Eric Ong says: “While we are still positive on TMG’s long-term growth strategy, we think the group needs a bit more time to fully reap the benefits of maximising its assets and enhancing margins in its three key markets.”
TMG recently reported its 1HFY2025 ended December 2024 results, which saw a net loss of $12.9 million mainly due to the poor performance in its Malaysian operations and increased interest expenses related to the acquisition of FV Hospital in Vietnam.
See more: Thomson Medical Group sinks into red, reports net loss of $12.6 mil for the 1HFY2025
“While we already expect the group to face near-term headwinds, the magnitude of the losses still caught us off guard. Even as TMG continues to optimise its business across key markets and likely narrow its net loss in the 2H, we think the group is unlikely to turn profitable in the short-term,” says Ong.
In 1HFY2025, the group’s revenue was 18.4% higher y-o-y at $199.1 million, largely driven by the revenue contribution from Vietnam following the acquisition of Far East Medical Vietnam Limited (FEMVN) in December 2023. This was partially offset by the cessation of project-related services, such as managing the vaccination centres and the Transitional Care Facilities (TCF) in Singapore in December 2023.
“However, we note that TMG’s bottomline was adversely affected by the effects of negative operating leverage in tandem with the stubbornly high opex, particularly inventories & consumables, staff and finance costs,” adds Ong.
Its Malaysian operations in 1HFY2025 were impacted by the termination and pricing adjustments of certain insurance contracts, which led to a revenue shortfall. While these adjustments have caused short-term financial pain, management said they are part of the group’s ongoing strategy to recalibrate partnership structures to ensure long-term sustainability and profitability in the Malaysian healthcare market.
The recent appointment of Dato’ Dr Adzuan Abdul Rahman as new group CEO of its 70%-owned TMC Life Sciences will be key to this transformation and repositioning efforts given his strong network within the medical community.
Looking ahead, TMG will continue to expand its capacity & specialist care offerings/services, as well as focus on driving operational efficiencies and synergies across the region by leveraging on digital health innovations.
As at 2.15pm, shares in TMG are trading at 4.4 cents.
