Records improved 1QFY09 results. Thomson Medical Centre (TMC) recorded a 5.9% YoY growth in 1QFY09 net profit to S$2.9m, as revenue expanded 9.9% YoY to S$16.4m, boosted by strong performance in all business segments. The results were in line with our expectations. TMC achieved higher baby deliveries in 1Q09, over the same period a year ago. It also handled an increased number of ancillary services (e.g. diagnostic imaging) and saw a larger number of patient referrals and higher inpatient admissions.

Hospital projects in Vietnam progressing well. Its 260-bed hospital project in Bing Duong Province is on track to be completed in 3Q CY09 (contribution from FY10). TMC is also is the process of finalising the business plan for its other hospital consultancy project in Hanoi. This could increase the contribution from its consultancy business, going forward.

Taking steps to grow. Its Thomson Women Cancer Centre (TWCC) is expected to commence operations in 3Q09. The establishment of the cancer centre is in line with its strategy to grow organically. As a leading provider in women’s and children’s healthcare services, the establishment of TWCC would further strengthen TMC’s position as a specialist in women’s healthcare services.

Maintain BUY. We are estimate earnings of S$13.0m (EPS: 4.4 S¢) for FY09 and S$14.6m (EPS: 5.0 S¢) for FY10. Although the economic downturn could result in fewer inpatient admissions, we believe TMC is less vulnerable as it is in a niche segment. We ascribe a PE of 12x for TMC. Applying to its blended FY09/10 earnings, we arrive at a fair value of S$0.55 for the stock. We maintain our BUY recommendation.