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Health Management International Ltd’s Latest Earnings: Dividends Up for the Year

Health Management International Ltd (SGX:588) is a regional private healthcare provider with presence in Singapore, Malaysia and Indonesia. Currently, it owns two tertiary hospitals in Malaysia, a healthcare training centre in Singapore, and a network of representative offices in those three countries.

This morning, the firm announced its financial results for the full year ended 30 June 2017 (FY2017).

Let’s take a look at the financial figures from the latest period:

1. Revenue for FY2017 increased 9.5% year-on-year to a high of RM435.8 million. This was mainly driven by higher patient loads and average bill sizes at the healthcare provider’s two hospitals – Mahkota Medical Centre and Regency Specialist Hospital. For the fourth quarter of FY2017, patient load grew 3.7% year-on-year despite Hari Raya Puasa falling in June.

2. Net profit rose from RM20 million in FY2016 to RM20.6 million in FY2017, an uptick of 3%. Higher administrative costs due to a consolidation of its operations (more on it later) largely ate into the net profit for the year.

3. However, diluted earnings per share for the year was at 3.17 RM cents, a decline from 3.38 cents seen in FY2016. The drop was due to a higher number of shares outstanding in FY2017 as compared to FY2016.

4. As at 30 June 2017, Health Management International had RM87 million in net debt. This is a deterioration from RM37.1 million in net debt that it had on 30 June 2016.

5. Cash flow from operations for FY2017 was at RM74.4 million and RM10.6 million was spent on capital expenditure. Therefore, the healthcare group brought in around RM64 million in free cash flow for the year, a decline from RM70 million raked in a year ago.

Apart from its two hospitals, the company’s education business registered a RM5.6 million growth in revenue due to higher student headcount.

In March this year, the healthcare provider announced the completion of its consolidation of ownership in 48.9%-owned Mahkota Medical Centre and 60.8%-owned Regency Specialist Hospital to 100% each. With that, 100% of net income is now attributable to shareholders of Health Management International.

Shareholders will receive a final dividend of 1.0 RM cent per share, a 33% increase from 0.75 RM cent declared a year ago.

Going forward, both hospitals will be expanding their capacity. At Mahkota, operational bed capacity will be increased from 266 beds currently to 300 beds in FY2018. There are plans to further add capacity to a target of 340 beds in the future.

Meanwhile, at Regency, operational bed capacity will be increased from 166 beds to 200 beds in FY2018. Regency will commence construction of a new hospital extension block adjacent to its existing hospital block in FY2018. The hospital extension block is expected to be commissioned in FY2021.

With the new extension, Regency will become a 380-bed tertiary hospital, with an option for the capacity to be expanded to 500 beds eventually.

Health Management International sounded upbeat about its future:

“Structural growth drivers in the form of an ageing population, rising affluence, increasing prevalence of chronic diseases and an increase in demand for quality healthcare should provide additional tailwinds as the Group positions itself as a leading regional healthcare provider.”

Shares of the company opened at S$0.645 this morning. This translates to a trailing price-to-earnings ratio of around 64 and a dividend yield of 0.5%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.