Healthway Medical

I started accumulating shares in Healthway earlier this year at 10c. Fundamentally, a strong company. Technically, its price is consolidating. Buy signal appeared on the MACD as it rose above zero on a green histogram day, forming a dragonfly doji in the process. On the weekly chart, rising 20wMA provides support. Definitely has an upward bias. Successfully breaking the top of the cup formation seen earlier at 14.5c would give an immediate target of 17c and an eventual target of 19.5c. Patience will be rewarded.

\'newbiestock\' at CNA forum said this. Do u all agree with him/her? >>> Personally, i do think that HW is certainly expanding very fast. And, i do agree with you about their strong branding here in sg when it comes to their primary GP healthcare service here. To be frankly speaking, I was really impressed when even a PRC friend of mine in sg have heard about Healthway Clinic. If HW maintain this compounded rate of revenue growth, there\'s a possibility tat their revenue and earnings may grow to catch up with Raffles MG in three to five years. Anyway, if u look at RMG\'s Q309, revenue only grow by 8% (4m increase), which i think is not really impressive. If it can really grow to the size of present RMG, i believe its share price can hit close to 0.40 cents or slightly above. But i think there are also a few obstacles which prevent HW\'s share price from moving up: 1) Did not hv a strong cash flow when compared to RMG and Parkway. Heard their debts will be fully repaid only in year 2012. Dividend yield will be low because they need cash for executing their acquisition plans and pay off debts. (Yet, they are seeking possible acquisition and cooperation means with Crane Medical... Crane Medical is already making a loss lor.. I am not against their expansion in Shanghai... but hv to admit that this brings in additional risks for investor. Of course, if they succeed, it will be super huat for all investors. Anyway, i am neutral about their China\'s expansion plans since i really don\'t know abt the healthcare biz there in China... Do agree that overseas expansion will be a major stepping stone for HW and long run, it is essential) 2) i am kinda concern abt the huge no of shares being issued in the stock market. I know they want to conserve their cash reserve so they provide the options to allow investors to opt for shares... But at that rate that they keep issuing new shares, it seems like shareholder\'s equity will be easily diluted.

I am not too concerned about Healthway paying little or no dividend. This is a growth stock, not a dividend stock. I opted for scrip dividend instead of cash the last time. There will always be growing pains and uncertainty. That\'s why Healthway is trading at 11x PE while RMG is trading at 19x PE. There is a discount for risk but I feel that it\'s too heavily discounted. A 17c target which translates into a PE of 14x for Healthway is realistic.

Healthway\'s chart is interesting. Its price is going through a protracted consolidation period after the cup formation was completed in August. 9.5c is the lowest point of the cup while the brim is at 14.5c. The halfway point is 12c. The lowest price in the consolidation period since August is 12c in late October. This cup with a very long handle is seeing volume dwindle over time. As the MFI and Stochastics show, there is simply no momentum in this counter since mid August. However, OBV shows consistent accumulation and this picture has not changed. This is a counter for long term investors but if I\'m going to do a bit of crystal ball gazing, I am willing to hazard a guess that price might see a significant upmove end of this year or early next year. Rising 20wMA and 100dMA at 12.5c should limit any downside.

Historic PE according to Bloomberg: Healthcare stocks average is 24.6X Healthway 12.5X Parkway 43.3X Raffles 21.0X Q&M Dental 16.1X

Some say that Q&M is overpriced. I am of the opinion that Healthway is too cheap and should trade closer to Q&M\'s PE. A PE of 14 for Healthway translates into a price of only 17c. At 19.5c, the PE would be about 16.5 which, I feel, is about right. The current weakness in Healthway\'s price presents an opportunity to accumulate and I\'ve done so.