Despite new S'pore billionaire investor, loss seen for TMC

PETALING JAYA: The emergence of Singapore billionaire Peter Lim Eng Hock as the second biggest shareholder in TMC Life Sciences Bhd is unlikely to spur any change in fortunes any time soon in the loss-making fertility firm, according to analyst reports.

OSK Research, in its report yesterday, said TMC, with financial year ending Dec 31, is likely to record losses this year and minor earnings next year.

“Judging from the 52 sen per share price tag, we think Lim is probably looking beyond financial year 2012 for his investment in TMC,” the report said.

The research house said the group’s flagship hospital, Tropicana Medical Centre in Kota Damansara, would “eventually make profit”.

“Judging from the slow progress of Tropicana Medical Centre, its gestation period may even stretch into the first half of 2010 or after.”

From a net profit of RM8.94mil in 2006 and RM9.34mil in 2007, TMC’s net profit fell to RM3.58mil in 2008. It incurred a net loss of RM8.48mil in 2009.

The company posted a net loss of RM2.66mil on revenue of RM12.37mil in the first quarter ended March 31, 2010. “We had expected the company to achieve close to break even during the quarter but it had instead reported a RM2.6mil net loss,” said OSK.

Kenanga Research, in its report, said it expected TMC to “return to the black” in 2011.

“TMC remains loss-making as it is carrying high fixed overhead of running the new hospital facilities (Tropicana Medical Centre) that is below its break-even operating capacity but (this is) improving. It is expected to return to the black in FY11.”

The brokerage added that it was “disappointed” the new shareholder – Lim – was not someone from within the healthcare industry.

“We are disappointed that the acquirer did not turn out to be an industry player which could add value in terms of customer base (and) lower overall centralised administrative expenses.

“However, it is positive to note that investors who have followed Lim’s investment trends have made money, given his astute ability to pick winners. This could also increase interest in TMC,” it said.

Lim, dubbed “the king of remisiers’’ in Singapore, has varied investments including in education and fashion. He was ranked by Forbes Asia this year as the country’s 8th richest man with a net worth of US$1.6bil.

On Wednesday, Lim emerged with a 29.6% stake in TMC while a separate filing revealed that TMC founder and managing director Datuk Dr Colin Lee Soon Soo had sold his entire stake in the company at 52 sen a share on the same day, representing 20% of TMC’s issued capital.

Two other off-market deals of 29.19 million shares and 454,585 shares respectively were also done that day. It is believed that the shares belonged to Soon Soo’s brother, Soon Swee.

Collectively, the three blocks represented some 25% stake valued at about RM78mil in the company. It is unclear where Lim acquired the remaining 4.6% stake from.

TMC said in a statement on Wednesday the sale of shares by Soon Soo would not have any impact on the group’s daily operations.

It said Soon Soo would remain as managing director of TMC and would continue to practise fertility treatment and obstetrics and gynaecology at Tropicana Medical Centre.

Kenanga said Soon Soo’s continued practice at Tropicana Medical Centre was crucial to the profitability of TMC.

“We do not think he will move his practice away, given that it will be difficult to replicate the facilities in a short span of time.

“We believe that putting more concentration on the fertility practice and away from managing the listed entity would be good for both the company and him.”

OSK said it was too early to tell if Lim would appoint someone to the board or whether there would be a drastic change in the management team. “From our understanding, Lee (Soon Soo) is likely to remain on the board and continue to oversee the medical centre.”

TMC shares fell 3 sen to close at 52 sen yesterday.

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Related Stories: Singapore billionaire buys 29% stake in TMC TMC Life hopes to return to the black in Q4 TMC Life lower on main board transfer

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