New TP of S$1.85 (~20x P/E for healthcare) – Our TP and higher EPS (up 6% in 09-11E) reflect strong growth momentum in 1Q09 and increased confidence in Parkway's execution of its international expansion. Recent stock weakness makes Parkway an attractive laggard play, in our view. Upgrade to Buy.

1Q09 results – PATMI (excl. exceptional items) of S$23.4mn was ~10% ahead of our expectations, with the healthcare segment and International hospitals leading the YoY growth, aided by cost-cutting and government incentives. Net gearing remained largely constant vs. 4Q08 at 0.5x.

Hospital segment – Singapore inpatient admissions and day cases -2.1% qoq, +1.3% yoy driven by higher day cases; net revenue PAPD -2.8% yoy. As a result, Singapore EBITDAR -13% yoy but partly offset by strong +36% growth overseas from Brunei cardiac centre and higher % of sales from Gleneagles KL.

Healthcare segment – EBITDAR grew +27% yoy and margin expanded 247bps from strong execution – Parkway Shenton secured several new corporate contracts, higher utilization of lab services, mgmt fees from Abu Dhabi hospital, World Link integration, and Shanghai Gleneagles expansion.

Earnings expectations – While mgmt concedes operating environment will “remain challenging” with a dip in foreign patients from traditional markets, Street earnings expectations are now at manageable levels after downgrades in the past 12 mths. We are now more confident of the group’s ability to execute its expansion plans internationally following its growth momentum in 1Q09.