Singapore O&G 1H 2020 results: The good and the bad

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.

Good

  1. 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.
  2. Paediatrics was the star performer with revenue and operating profit growing 21% and 68% year on year.
  3. 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.
  4. SOG expects the company to remain profitable at the operational level in 2H 2020 and over the next 12 months.

Bad

  1. 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.
  2. 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.

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