ISEC Healthcare

ISEC Healthcare: (S$0.34) Healthcare stocks in favour; this one appears a laggard
Amid an uncertain environment, healthcare stocks appear to have stood out. Notably, Singapore Medical Group’s (SMG) share price has nearly doubled this week on an earnings turnaround.


Meanwhile, Singapore O&G (SOG) has appreciated 63.2% from the beginning of Apr to $1.25 today. Within the healthcare sector, we find ISEC Healthcare to be a laggard.


ISEC provides competitively-priced eye surgery, care and consultancy services. It plans to expand into regional markets via M&As. When compared to SMG, which is just turning around, ISEC is already is profitable, with solid growth prospects and balance sheet.


From a valuation angle, ISEC is also cheap compared to SOG, which currently trades at 35x and 30x forward P/Es using the consensus estimates of three brokers. ISEC currently trades at 25x and 21x forward P/E.


SOG is an appropriate comparison for ISEC given that both are in single specialty practice, while SMG is a turnaround play, hence valuations are still a work in progress.


Interestingly, both SMG and ISEC have the same shareholder - Dr Tony Tan of Parkway. He owns about 4% of ISEC and 20% of SMG. SMG also has a good portion of its business coming from opthalmology.


As such, we see scope for both companies to work together in future. Arguably, there is also the possibility of a merger of equals once SMG is able to fully execute its turnaround strategy.