On 9th September 2022 (Friday after trading hours), Singapore Medical Group ("SMG") requested for an immediate trading halt while awaiting an important news release to be announced by its CEO, Dr Beng Teck Liang. I have been wondering how come the share price of SMG suddenly came back to life and surged to S$0.325 per share as at 9th September 2022 when it has been trading with little volume at the range of S$0.305 per share to S$0.310 per share. In fact, it has been stuck at S$0.310 since August 2019. As usual, I reckon that information about the upcoming major change seems to have been leaked out to friends and relatives similar to what I have seen from other listed entities just right before their major business decision announcement.
1. Upcoming major M&A or Privatisation?
I am intrigued by what will be announced by Dr Beng Teck Liang in the coming week. It could be a new M&A opportunity that perhaps need rights issue for funding or even better, it could be a privatisation exercise given that the PE ratio of SMG is way below the industry average relative to other medical groups.
In order to unlock the undervalued business of SingMedical Group (“SMG”) which I mentioned briefly in my post on 8 July 2019, I have suggested the possible option of privatization using the example of Thomson Medical Centre which had previously been acquired by the local business tycoon Peter Lim before doing a “future relisting” on the SGX 6 years later.
2. Poor history of corporate action to close up the gap of market price to intrinsic valuation for all shareholders.
Previously, there was an exercise whereby the senior management was in talk with 3rd parties with regard to the purchase of SMG shares. However, it fell through.
There was also a sales of shares by existing directors to the Korean Medical Group CHA at S$0.605 per share in February 2019. However, this was not extended to other shareholders.
In short, the current management team has a poor track record of unlocking the intrinsic valuation of SMG for all shareholders. Let's hope the coming announcement will lead to a substantial increase in its share price.
Parting thoughts
Given the poor track record of corporate action execution, I am not too optimistic for now until I gain greater clarity of what SMG intends to do. In the meantime, its dividend yield of approximately 4% to shareholders is comforting while waiting for the tree to bear fruits.
Updates on 14 September 2022 (pls click on link below for the details of privatisation being announced:
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