TMC FY2010 analysis

Thomson Medical Centre released the FY2010 results on 26th October 2010. TMC did not disappoint as usual. I have updated my analysis to include FY2010’s results.

Its revenues grew 21.2% compared to FY2009. Net profit grew 27.8% for FY2010. The gross profit margin and net profit margin improved as well. GPM is at 43.71% while NPM is very close to 20%.

Looking at balance sheet, it has zero debt with total cash, including fixed deposits, standing at $30.5 million. Its ROE and ROA improved as well. ROE, excluding reserved valuation, stands at 27.6% compared to 21.6% in FY2009. ROA stands at 9.7%. Retained earnings increased to $28 million. Equity stands at $142.1 million and the equity CAGR is at 15.05% over the 5 years.

At the cash flow front, free cash flow is at $20 million for FY2010. Capex expenditure was a mere $808,000 for FY2010. This showcases the great cash generating abilities of TMC!

The intrinsic value of TMC stands at $1.16 when using DCF. I used current year FCF of $20 miilion, discount rate of 5% and cash flow growth rate of 15% (the actual average FCF growth rate is at 22.46%).

My take on Peter Lim’s offer

Peter Lim has offered $1.75 per share. This is at a premium of 51% over the intrinsic value I calculated.  I’m still torn whether to keep my shares or sell it. One part of me wants to keep the shares as TMC is a gem and I feel it has potential to grow even further. The other part tells me to sell as I don’t know if Peter Lim will act in the interest of shareholders just like the management of TMC and whether he will meddle with the daily operations of TMC. A win-win situation would be when Peter Lim doesn’t interfere with the operations of TMC and also provides money for TMC to expand in Singapore following the space crunch that has been around for some time.  Since Peter Lim is buying over a huge stake of 39.34% of the company, he might even have plans to buy the whole company and de-list it. We don’t know what his real intentions are. I will just wait and see for the next 2 weeks how this saga pans out and decide slowly…

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