Brief Overview
Thomson Medical Group delivered FY26 results largely in line with expectations, with revenue and EBITDA meeting 97% and 98% of forecasts respectively. The company experienced earnings recovery across all three operating countries – Singapore, Malaysia, and Vietnam – with EBITDA expanding 21% year-on-year in the second half to S$43.6mn. Growing revenue intensity has driven earnings improvements, though currency headwinds affected results.
Investment Positives
The primary positive driver for Thomson Medical has been the significant growth in average bill size across all three operating markets. Singapore recorded the largest increase in average bill size at 421.8%, driven by a combination of increased case complexity and a higher product mix as procedures were shifted to outpatient day surgery.
Malaysia also benefited from improved revenue intensity, with average bill size growing 111.9%. This improvement was supported by oncology and gastroenterology cases, alongside the return of some insurance payers. The Malaysian operations saw EBITDA expand 34.6% as the business rebuilds its insurance relationships.
Vietnam demonstrated strong operational momentum with inpatient volumes increasing 46.5% and average bill size growing 2.1%. The Vietnamese operations benefited from higher volumes including robotic surgery procedures and increased capacity, resulting in EBITDA growth of 52.4%.
The group’s strategic pivot away from Singapore’s historical reliance on obstetrics and gynaecology cases is showing results, with the addition of more orthopaedics, ENT and general surgery procedures improving the revenue mix.
Investment Negatives
The key challenge facing Thomson Medical is declining volumes across the group. Total inpatient volumes fell 7.8% year-on-year to 39,000 patients in FY26. Singapore experienced a 9% decline in inpatient volumes, primarily due to lower delivery cases in obstetrics. Malaysia recorded an 11.5% drop in inpatient volumes, which the analyst attributes to the absence of insurance payers.
Finance costs continue to weigh on earnings despite a 16.5% reduction due to lower interest rates. The company also recorded a S$15.2mn goodwill impairment due to a higher discount rate assumption.
Outlook
The analyst views Thomson Medical as successfully executing its operational turnaround strategy. The company is effectively diversifying Singapore away from obstetrics cases whilst Malaysia rebuilds its insurance partnerships with foreign patients and oncology leading increased revenue intensity. However, finance costs remain a burden on earnings performance.
Recommendation & Target Price
Phillip Securities Research has upgraded Thomson Medical to BUY due to recent share price performance. The target price remains unchanged at S$0.071 using a sum-of-the-parts valuation approach. The analyst maintained FY27e earnings forecasts while rolling over valuations to FY27e earnings.
Frequently Asked Questions
Q: What drove Thomson Medical's earnings recovery in FY26?
A: Growing revenue intensity was the major driver, with average bill size increasing across all three countries - Singapore, Malaysia, and Vietnam.
Q: How did Singapore operations perform in FY26?
A: Singapore saw average bill size increase 421.8% despite a 9% decline in inpatient volumes due to lower obstetrics cases. The operation is successfully adding more orthopaedics, ENT and general surgery procedures.
Q: What is driving Malaysia's improvement?
A: Malaysia benefits from oncology and gastroenterology cases, supported by the return of some insurance payers, resulting in 34.6% EBITDA growth.
Q: Why did group volumes decline?
A: Group inpatient volumes fell 7.8% to 39,000, with Singapore declining 9% due to lower deliveries and Malaysia affected by the absence of insurance payers.
Q: What was the impact of currency on results?
A: Currency was a headwind to the results, though specific impacts were not quantified in the report.
Q: What risks remain for the company?
A: Finance costs continue to weigh on earnings despite lower interest rates, and the company recorded S$15.2mn goodwill impairment.
Q: What is the investment recommendation?
A: Phillip Securities upgraded Thomson Medical to BUY with an unchanged target price of S$0.071, maintaining FY27e earnings forecasts.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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