Brokers' Call: DiSa Ltd

DiSa Ltd | Buy

Fair value: 2 cents

Aug 30 close: 0.08 cent

Broker: KGI Securities, Aug 30

DiSa's technology business continues to exhibit strong growth.

Sale of Digital Safety (DiSa) codes rose 87.8 per cent year on year to $169,000 in financial year 2018 (FY2018), becoming the main driver of revenue.

Revenue contributions from the technology business are now 71 per cent of total revenue, compared to 28 per cent in FY2017. As a result, gross margins rose to 72 per cent in FY2018, compared to 35 per cent in FY2017, and we expect further margin expansion as momentum in the technology business picks up.

However, operating margins remain weak even as net cash position improves.

Operating losses declined 43.8 per cent year on year to $9.68 million, driven by one-time items, an increase in operating lease and employee benefit expenses as business picks up in the United States.

Among risks are slow user adoption and a breach in DiSa's encryption that could lead to reputational damages and a decline in revenue. Going concern could become a problem if DiSa fails to scale and cover its burn rate.


Health Management International | Add

Target price: 79 cents

Aug 29 close: 61.5 cents

Broker: CGS-CIMB, Aug 28

Distribution and marketing expenses were 65 per cent higher due to the rebranding exercise, and should stabilise even with the opening of StarMed.

Health Management International's (HMI) 62.5 per cent-owned StarMed has received the relevant Ministry of Health licences and will commence operations in FY2019.

Spanning four levels, it will not only boast specialist outpatient and day surgery centres, but also a full range of radiology and diagnostic equipment.

Management expects a gestation period of two to three years, though start-up losses would be less hefty given the format of the ambulatory care centre.

We forecast RM3 million (S$1 million) to RM 7 million Ebitda (earnings before interest, taxes, depreciation and amortisation) loss per annum in its first three years of operation.

Notwithstanding slower inpatient load growth and the trend towards shorter hospital stays, HMI continues to invest in future growth. Plans to diversify marketing efforts to other South-east Asian countries are also in the pipeline.

A version of this article appeared in the print edition of The Straits Times on September 03, 2018, with the headline 'Brokers' Call'. Print Edition | Subscribe