Is Singapore O&G (SOG) going to be another Healthcare IPO darling?

The new kid on the block to join the Booming healthcare fraternity is Singapore-based healthcare firm, Singapore O&G Ltd ("SOG" in short). You can find the IPO Prospectus here.

According to its propectus & factsheet, SOG is a niche player in the healthcare industry as it focuses on the women's healthcare, with middle-level professionals as its main target audience. Thus, their primary focus is skewed towards the following: pregnancy care and delivery, the female reproductive system, and gynaecological and breast cancer.

SOG's total of 8 clinics are situated in five different locations as highlight below:

  • 2 clinics in Parkway East Medical Centre, 
  • 3 clinics in Gleneagles Medical Centre, 
  • 1 clinic in Thomson Medical Centre, 
  • 1 clinic in Mount Elizabeth Novena Specialist Centre 
  • 1 clinic at Cassia Crescent.

In case some people are not sure, Gynaes often work by themselves but are stationed across different clinics for the usage of the equipment and stuff. I searched for one doctor (Dr Beh Suan Tiong) based in Thomson Medical and found out he got his own website -> http://drbeh.com.sg/.

The way i see it, this company is formed by several gynaes with the aim of doing an IPO and expanding beyond their individual medical practice (something like what Q&M Dental has done years back).

Details of IPO

From the picture seen on the left, its a rather tight timeline to subscribe for the public tranche of 2.2 million shares while 
41.4mil will be placement shares.

The shares are offered at 25 cents a piece and will be listed on the Catalist board.
If fully subscribed, the company will raise S$10.9 million through the public offering. The company will use the IPO proceeds for working capital, to enhance investments in healthcare professionals and synergistic businesses, and also to expand its business operations.

Financial Performance & Investment Merits

A picture is worth a thousand words so i shall let the 2 pictures do the talking below. The main gist is that the company's financials are in good shape, with a steady increase in profits. What amaze me is the 35+% net profit margins.. it just shows how profitable delivering a baby is (milking our monies everytime we go back for a 5min checkup!~).

My thoughts

People may think that by distributing 90% of the dividends, the company is becoming more like a cash cow and unlikely to grow in strength from here.

However, by doing a comparison to the time Q&M dental was listed (in yr 2009);
they actually started off the exact same way. Fast forward 6 years and their share price just skyrocketed >100%! over the past year on the back of a string of acquisitions being announced.

Personally, i feel that this IPO will garner lots of interest due to 3 main reasons:
  1. Just look at all the healthcare stocks in Singapore (Talkmed, Q&M Dental, Raffles Medical etc.) and how their share prices have shot up. SOG would do well to ride on the healthcare boom right now.
  2. Healthcare industry is one highly predictable industry, as we can easily visualise on how the private sector is serving the affluent market. In most cases, people want to give the best to their family members and would not scrimp on this.
  3. High net profit margins and huge free cash flow are 2 important metrics for a company to expand steadily without any burden of debt. 
  4. Lastly, a moderate P/E ratio of 12.82 (based on FY14 EPS) and potential 7.3% dividend yield are deeply enticing.
With that, i wish my readers all the best and Huat Ah!