Eye care specialist, ISEC Healthcare (SGX: 40T), extended its streak of growth in 2018, as revenue and earnings per share increased by 9% and 7% respectively. The improved results also prompted management to recommend a bumper special divided, bringing the total dividend for 2018 to 2.54 Singapore cents, more than double 2017’s dividend of 1.2 cents per share.
On top of the impressive headline numbers above, here are three other important takeaways from ISEC Healthcare’s 2018 earnings update that might interest shareholders.
Higher patient load in Malaysia drove growth
ISEC Healthcare, which counts 26 specialists and six general practitioners in its ranks, operates four specialised eye-care centres in Malaysia and one in Singapore. It also has three family medicine clinics here and a 25% stake in I Medical & Aesthetics Pte Ltd.
In 2018, higher patient volume at its specialised eye-care centres in Malaysia and Singapore were the main drivers for growth. In Malaysia, the company’s revenue increased by 11%, while revenue from its Singapore operations rose 5%.
Asset-light and high cash flow model
ISEC Healthcare has an extremely asset-light business model, which generates a good amount of cash flow. As of 31 December 2018, the company’s net asset value was only S$66.9 million while its profit was S$8.7 million. Based on these numbers, ISEC Healthcare’s return on equity was a healthy 13%.
In addition, the company ended 2018 with S$27.1 million in cash and equivalents and no debt. It also generated S$12.3 million in cash flow from operations before working capital changes over the course of the year.
Because of its asset-light model and healthy cash flows, ISEC Healthcare is able to return a large portion of its earnings back to shareholders as dividends.
In August 2018, ISEC Healthcare announced the incorporation of ISEC Myanmar Company Limited together with three other third parties. The new entity will commence operations in the second quarter of 2019. The new business will probably be a boost to ISEC Healthcare’s revenue this year, but investors can expect some start-up losses, as with most new operations.
Dr. Wong Jun Shyan, ISEC Healthcare’s executive director and chief executive officer shared the following comments on the company’s future in the latest earnings update:
“Looking ahead to the next 12 months, we believe the region’s ageing population, as well as increasing awareness about the benefits of seeking early treatment for ophthalmology issues, will continue to drive demand for the specialised services that we provide. We will continue to search for investment opportunities to strengthen our presence in our existing markets and to explore new markets such as China, Indonesia, Myanmar, and Vietnam.”
The Foolish bottom line
ISEC Healthcare has benefitted from higher demand for private healthcare services in the region over the past few years. An ageing population and a growing middle class in Asia will continue to be key drivers of growth for ISEC Healthcare for the foreseeable future. At the time of writing,ISEC Healthcare’s share price is at S$0.31, which gives the company a trailing price-to-earnings ratio of 19 and a dividend yield of 8.2%.
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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 Jeremy Chia doesn’t own shares in any companies mentioned.