Singapore O&G Ltd

[buyhighselllow]

This reminds me of the Talkmed listing which has done really well since its IPO.

Nick, Agree that there are parallels with Talkmed. Same IPO banker too Hong Leong Finance. Both operate in a niche area with a small but growing chain of clinics. We are essentially betting on a few doctors (i.e. Dr Ang Peng Tiam for Talkmed and Dr Lee Keen Whye, Dr Heng Tung Lan, Dr Beh Suan Tiong for SOG) as they are the rainmakers.

I think the main difference is Talkmed Dr Ang is the controlling shareholder, CEO and the main rainmaker. SOG CEO and co-founder Dr Ng Koon Keng does not run his own clinic and owns less than 4%. Not sure whether this is a good or bad thing, curious what forumers think. Good - he can focus on expanding the business as not bogged down serving patients daily. Not good - less alignment of interests if we want to compare with Talkmed since he owns only a small stake

I think it seems like a decent short-medium term investment as the proposed dividend will support the price. Clean balance sheet is obviously a key selling point too. Longer term i'm not sure yet, what do others think?

The 3 rainmakers for SOG collectively generated 90-93% of the Group's revenue for the past three years. They will collectively own 63.91% of the Group post IPO.

Pros:

1) More diversified rain-makers (1 vs 3)
2) Separation of operational and executive management team.
3) Alignment of interests

Cons:
1) Weaker margins than Talkmed.
2) Short operating history.

The yield will prove to be attractive coupled with the low PE. But as others have mentioned, it will be quite tough to secure it from the Public Offer due to the small float available.

Quite interested to see how sustainable this model (Talkmed, SOG) will be in the coming years.

Nick,

To add on to the discussion on SOG as a long term investment, i believe the key is whether the IPO can act as a catalyst to attract more doctors to join SOG. The monetary incentives of joining SOG suddenly becomes better overnight vs. running your own private practice (i.e. i might be able to get stock options on top of my salary)

If SOG can reduce the concentration risk and diversify its revenue base away from the 3 doctors, then i would start seriously considering it as a long term play. I think for long term investors the 2 things to look out for are: 1) how quickly SOG expands its stable of doctors post IPO 2) Shareholder activity post the 6 month moratorium

In the short to medium term though, as Cityfarmer pointed out i agree that it should trade closer to Talkmed implying a ~50% upside. I don't see how you can lose money on this trade given the solid cashflows, debt-free balance sheet, dividend yield and relatively undemanding valuations. Therefore i will subscribe for this IPO too. All the best to everyone participating!

[calebseah]

One thing about this business is that they have a very strong balance sheet and keeps on having high free cash flow.

The acquisitions of the different clinics seems to be that they utilised stocks options fully thus they were able to get all the assets of the acquired clinic.

One weakness i can see is that, they are very heavily reliant on those key doctors that are generating most of the wealth.
Also i'm also not sure how if the CEO can get to run his job well when the founders(doctors) are also the specialist yet the executive chairwoman of the company....

Besides $3m and 90% payout dividend seems to be quite low for expansion, imagining that profit will have grown 13%(Since CAGR is 19% for last 3 years), with profit at 4.8m, assuming 90% paid. a total of 3.5m will be used for expansions, sounds contradictory as to how much can it grow?
Especially so when they have acquired DR BEH clinic at S$3,065,808(Page a-34).

Probably trying a hit n run.... ?

[weijian]

I view it differently. We are not simply buying a healthcare operation. Rather, this is akin to investing in a healthcare professional (the trio) and the market capitalization is the PV of their income stream. Personally, this is why the PE of Talkmed and SOG (at IPO) is in their low teens as compared to healthcare operators whose PE lies over 20. The revenue of these businesses are 'salary of the professionals'. The margins are high since nobody depreciates human life in the accounting world (yet). Perhaps one day, we can start investing in football stars too haha ! This is my own view of their business model. I intend to apply for the IPO. I think the yield will prove to be attractive to many investors coupled with Talkmed stellar performance post IPO. Feel free to point out otherwise.

Hi Nick,

A different and interesting way to look at this IPO. There are 'specialized PE funds' already investing in young South American talent since some time ago. And i am adamant that in the last WC in Brazil, there could be a few 'scams' flying around about the opportunity to participate in the 'talent management' of the next Neymar/Messi. (Scammers are not going to stop at Brazilian social housing)

From the point of view as valuing the investment as the PV of the trio's income stream, it seems like 2 out of the 3 docs should be in their late 50s/early 60s (Dr Lee/Heng), while the Dr Beh should be in his late 40s/early 50s. Are their most productive years again behind or the best is yet to be? Are the older doctor-owners preparing a legacy for their offsprings with this IPO as the main motivation? (whom i guess should be in the medical profession as well too)

Finally, last 2 statements sounds interesting. Your strategy seems to be banking on the 'bigger fool theory' i suppose?

[yeokiwi]

So interesting, Dr Heng Tung Lan was the gynae for my kids.
She was very popular in the east side of Singapore.

To show appreciation, I will support the IPO..

But, she is really rich now so I do not see why she will want to spend more time managing listed company.
I suppose it is really another level of achievement that she is looking for.

[valuebuddies]

Mr IPO has in his blog disclosed that he can't even get the placement shares as most of them goes to the friends of the gynaes. I think now I can understand better why these doctors are so kind to share the profits with the public. 2.2m shares up for bidding, not easy to get, good luck for all apply including myself. BTW, anyone managed to get placement shares?

[Hill]

Hi, any idea when results will b out?

[valuebuddies]

Refunded as expected, get zero

[Hill]

Huh, so fast? I go check now. Thanks

[Kelvin]

Dbs not out leh

[Reyes]

this ipo very hard to get ....