2Q09 slightly ahead. 2Q09 net profit grew by 13.8% yoy to S$8.8m on the back of a 6.5% growth in revenue to S$53.9m. The better than expected earnings were a result of better operating efficiencies, particularly staff costs, which grew by only 3.4% vis-à-vis topline growth. Operating margins rose 1.5ppt from 18.8% in 2Q08 to 20.3% on the back of cost and operating efficiencies.

Resilient healthcare division. Topline growth from the Healthcare division was at 12.3%, higher than the 4.8% growth reported by the Hospital division. 3 new clinics were opened in 2Q, on track towards the Group's target of a total 5 clinics this year. Management shared that patient volumes were up 5%, helped by foreign patients (+13%) offset by dip in local patients (-7%).

Net cash of S$27.5m. Operating cashflow remained healthy at S$13.9m in 2Q09. This contributed to the Group's net cash position of S$27.5m. We expect net cash position to further strengthen to S$47m by Dec 09, based on our forecast. An interim dividend of 1cent per share was declared, similar to 1H08. Book closure would be on 20 Aug, while the dividend would be paid on 4 Sep 09.

Maintain Hold, TP: S$1.06. We raised our forecasts by 2% - 5% to factor in the lower than expected operating expenses. We maintain our Hold recommendation, but adjust our TP up to S$1.06 as we pegged it to 16x on FY09F earnings, in line with regional peers and ?1 standard deviation from its trading average.