Singapore O&G (SOG) reported a decent set of 1H 2020 results despite the COVID-19 pandemic in Singapore. Revenue fell 4% to SGD17.8 million while net profit fell 21% to SGD3.7 million
Here’s the good and the bad about Singapore O&G results.
- Let’s start with the good. Singapore O&G reinstated their dividend (0.5 cents). The 1H 2020 dividend is 19% lower year on year but it should be sustainable because the payout ratio is 62%. This dividend works out to an annualized 4% dividend yield which is fairly decent in this low yield environment.
- Paediatrics was the star performer with revenue and operating profit growing 21% and 68% year on year.
- SOG is exploring tele-medicine initiatives which include medicine delivery to overseas patients. With most of their clinics located in hospitals and restrictions on medical tourism, I think this is a great move.
- SOG expects the company to remain profitable at the operational level in 2H 2020 and over the next 12 months.
- O&G revenue was almost flat but operating profit fell 25%. No reason was disclosed but the company said that pay for some doctors have increased to encourage talent retention.
- Dermatology was hit badly in 1H 2020 with revenue and operating profit falling 17% and 68% year on year. There is still SGD12 million of dermatology-related goodwill left on the company so there’s a 50% chance that the company could do another write-down at the end of this year. I think they should write down all the goodwill so they can move forward with a clean slate.
All in all, I think the results were decent despite the headwinds caused by a global pandemic. Singapore’s birth rate appears to be bottoming out with births increasing 0.5% year on year after falling for three consecutive years. Excluding goodwill impairments, SOG is trading at 11.9x trailing earnings which seems reasonable for a healthcare company.