SMG's earnings poised for a three-fold growth to $7.3m next year on recent acquisitions

Retaining doctors is a major challenge, however.

DBS Group Research is bullish about the earnings prospect of Singapore Medical Group (SMG), propelled by recently announced acquisitions – Lifescan Imaging and Astra Women’s Specialist.

The research firm cautioned however that a key risk to medium-term profitability lies in SMG’s ability to motivate and retain doctors after the profit guarantees and service agreements expire in FY22F and FY23F, respectively.

Other risks it said include the risk of sector de-rating and risks inherent in future acquisitions.

SMG completed the acquisition of the remaining 61.9% stake in former associate, Lifescan Imaging (which generated profits of S$0.56m in 1H16) in Sep 2016, and recently announced the proposed acquisition of a chain of obstetrics & gynaecology clinics, Astra Women’s Specialists, which comes with a 6-year service agreement and 5-year profit guarantee of S$4.615m per year.

Based on DBS Group Research's estimates, the acquisitions will effectively triple its FY17F earnings to S$7.3m.