Parkway: International operations expected to grow

Revenue from Singapore operations lower, but that from International operations higher. Management indicated that for the early part of the year, revenue from its Singapore operations may be lower, attributed to the declining number of visitor arrivals. This decline is likely to be offset by the growth in revenue from its International operations, especially Malaysia. Parkway had expanded the capacity at its Malaysian hospitals and would continue expanding, to meet the growing demand for its services. International operations accounted for 33% of Group revenue in FY08.

Update on the progress of Novena hospital. Piling works are expected to be completed by end Sep 09. The design for the fully single-bedded wards hospital is expected to be completed soon. Construction costs are expected to decline further to about S$400m (initial budget was for S$500m). The Novena hospital is targeted for completion in 2011.

Medical suites to sell for at least S$3,500 psf. The sale of the Novena medical suites will be carried out in phases. Management highlighted that it would prefer to sell its suites for at least S$3,500 psf. While it has not started pre-selling its medical suites, Parkway has received quite a number of enquiries from doctors.

Impact of Medisave liberalisation is minimal. As the only private hospital with a Malaysian arm, Parkway is likely to benefit from the government's recent policy change to allow Medisave to be used for elective treatments overseas. The impact from this policy change is likely to be minimal, as it is usually price-sensitive patients (i.e. these patients are usually not key customers) who would be attracted by it.

We maintain our earnings estimate of S$78.0m for FY09. We have a target price of S$0.92, based on 13x blended forward earnings. Maintain SELL.

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