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Health Management International Ltd’s Shares Soared 3% This Morning: What Could Be the Reason?

Health Management International Ltd (SGX: 588) is a regional private healthcare provider with a 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. The hospitals in Malaysia are Mahkota Medical Centre and Regency Specialist Hospital.

As of the time of writing (9:14 am), the company’s shares are changing hands at S$0.675, up 3.1% as compared to yesterday’s close of S$0.655.

One of the reasons for the excitement might be that the healthcare outfit posted a 123% year-on-year increase in net profit for the first quarter ended 30 September 2017 (1Q2018). The bottom line increase came on the back of a 6.9% revenue growth for the quarter.

The following is a quick rundown on the financial figures from the latest quarter:

a) Revenue grew from RM109.5 million in the first quarter of financial year 2017 (FY2017) to RM117.1 million in the first quarter of FY2018.

b) Gross profit rose 7% year-on-year to RM40.6 million.

c) Profit attributable to shareholders more than doubled from RM6.2 million to RM13.8 million in the latest quarter.

The firm said that higher patient load and average bill sizes at Mahkota and Regency helped to prop up the top line.

Chin Wei Jia, the chief executive officer of the healthcare firm, mentioned:

“Leveraging on our strong brand equity and affordability, we continue to see rising patient loads at both our hospitals. While charting steady growth, we remain focused on delivering quality healthcare and broadening our specialist offerings in order to provide our patients with a comprehensive range of services. Concurrently, we are optimising utilisation within our existing buildings and streamlining operations to manage costs. This has translated to improvements in our profitability while ensuring our patients receive the highest quality of care.”

Due to rising demand for healthcare across the region, Health Management International is expanding its operations to capture the growth opportunities. At Mahkota, its plan to increase the operational bed capacity from 266 beds to 300 beds in FY2018 is on track.

Over at Regency, it will commence construction of a new hospital extension block adjacent to its existing hospital block in FY2018. The extension is expected to be commissioned in FY2021 and will have 380 beds, with a potential to expand the capacity to 500 beds.

Meanwhile, Heliconia Capital Management Pte Ltd, an investment firm linked to Singapore investment company Temasek, is investing S$11 million in Health Management International through a share placement exercise. The investment will see Heliconia have a 2% stake in the firm as it pursues the growth opportunities.

At the share price of S$0.675, the regional private healthcare provider is selling at 66 times its trailing earnings.

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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.