Thomson Medical stock rating cut to neutral by Phillip Securities

On Tuesday, Phillip Securities adjusted its stance on Thomson Medical (TASE:PMCN) Group Ltd (SGX: A50), downgrading the stock rating from Buy to Neutral and setting a new price target at SGD0.05. The revision follows Thomson Medical's report of a net loss of S$12.9 million, which has been attributed to a steep decline in Malaysian earnings and increased finance costs. The company's revenue and EBITDA for the first half of fiscal year 2025 stood at 41% and 32% of Phillip Securities' forecast, respectively.

The downgrade was influenced by several factors impacting Thomson Medical's performance. In Malaysia, the group faced a 90% reduction in earnings and suffered from the loss of insurers and the need to offer heavier discounts. Singapore operations did not escape unscathed, with a S$9 million drop in project-related EBITDA, while the Vietnam market is experiencing margin pressures due to aggressive pricing and marketing strategies.

In light of these challenges, Phillip Securities has revised its FY25e revenue and EBITDA projections for Thomson Medical downwards by 12% and 23%, respectively. The firm's sum-of-the-parts (SOTP) target price has also been reduced from the previous S$0.061 to S$0.048.

Despite the downgrade, Phillip Securities anticipates that Thomson Medical's losses have reached their nadir, with a recovery on the horizon. This optimism is based on several factors: the addition of new oncologists in Malaysia and Singapore, improved relations with insurers in Malaysia, and a post-renovation rebound in inpatient volume in Singapore. However, the competitive environment in Vietnam is expected to remain a challenge. The analyst also noted that significant earnings recovery through operational and financial leverage is projected for fiscal year 2026, following the development of a master plan for a new hospital in Johor.

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