Credit Update: Thomson Medical caps off a resilient FY26; near-term refinancing risk likely

We first covered the Thomson Medical issues and provided an update on the group following the group’s FY25 and 1HFY26 results. The group recently released its FY26 results, and in this article, we provide our updated view of the group’s credit profile

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Thomson Medical Group Limited ("TMG") is a healthcare services provider with operations across Singapore, Malaysia (via TMC Life Sciences Berhad), and Vietnam (FV Hospital). These three countries also represent the Group's key reporting segments.

In Singapore, TMG operates under the Thomson brand and is one of the largest private providers for women’s and children’s healthcare. In Malaysia, it runs Thomson Hospital Kota Damansara through its ~70%-owned subsidiary, TMC Life Sciences, and owns Thomson Hospital Iskandariah, which is still in the planning stage. In Vietnam, it operates FV Hospital, a multi-disciplinary specialist hospital.

Resilient financial results for FY26 with earnings growth outpacing topline

TMG closed FY26 (ending 30 June 2026) on firmer footing. Revenue rose 6.4% YoY to S$420.1m (FY25: S$394.7m), with all three markets contributing. Encouragingly, earnings grew faster. Adjusted EBITDA, which strips out one-off, non-cash items, is our preferred metric. On this front, TMG recorded a 9.9% YoY increase in Adjusted EBITDA of S$82.5m, mainly due to an increase in revenue growth from Malaysia.

Operating costs were largely kept in check, with the main driver in drug and consumable costs (+11% YoY) largely tied to the growing oncology business. We note the improvement in net finance costs of S$(47.4) m, down 15.4% YoY. However, this figure still caused TMG to report a net loss of S$(27.8)m, albeit a narrower figure compared to FY25’s S$(47.0)m. Moving forward, we expect TMG’s adjusted EBITDA to remain solidly positive, while waiting for its Johor Bay project to come online.

Malaysia shines while Singapore and Vietnam remain steady

Malaysia was the clear EBITDA growth driver across TMG’s operating segments, with Singapore and Vietnam showing resilience.

• For Malaysia, TMG saw revenue (+19.1% YoY to S$125.4m) and adjusted EBITDA (+52.9% YoY to S$21.4m) surge for this region due to a full-year contribution from its oncology centre. Cancer care is a higher-value service, which helped lift the region’s average bill (outpatient and inpatient) by a healthy double-digit clip. Better pricing, combined with a slight uptick in bed occupancy rate (49.0% in FY25 to 52.4% in FY26), provided the one-two punch combo that helped to offset a decline in inpatient numbers. Consequently, EBITDA margin widened to 17.0% from 13.3%. In our view, the ramping up of TMG’s Malaysian operations provides a growing earnings diversifier for the group (alongside Singapore), which is a clear credit positive.

• The RM$18.0b Johor Bay mega-development remains the group’s most significant long-term earnings catalyst. Strategically located within the Johor-Singapore Special Economic Zone, this integrated development, including a 47-storey ultra-luxury residential tower, is projected to have a gross development value of RMS$3.1b and could provide a potential uplift in earnings for the group over the longer term, which should support coverage for its 2028-2029 bond issues. That said, we note the lack of disclosure from management for the partial opening of the 500-bed Thomson Hospital Iskandariah, which was previously guided to coincide with the commencement of the Johor Bahru-Singapore rapid-transit system (RTS) (slated to begin in January 2027). Should this launch be delayed, it could push out the expected earnings contribution from this key catalyst, which could pressure TMG’s credit profile.

• For Vietnam, we see a more mixed picture. Visitor numbers (inpatient and outpatient) rose close to 7% YoY for each, leading to a recovery in revenue (+2% YoY to S$101.3m) despite a weaker Vietnamese dong. However, adjusted EBITDA softened slightly to S$14.8m (-1% YoY) due to higher staff and consumable costs. This deserves scrutiny; TMG completed the FV Hospital acquisition in December 2023, so integration should be showing by now. Against the roughly S$358m of debt taken on that year, which costs S$16m in annual interest, Vietnam’s full-year EBITDA of S$14.8m leaves much to be desired. Furthermore, TMG has written down S$90.3m of the acquisition’s goodwill over the last two years.  Looking forward, FV’s Hospital’s building expansion will add capacity for oncology, diagnostics and advanced surgery services, which typically carry higher margins; as oncology has done in Malaysia. That said, we still want to see Vietnam’s EBITDA posting solid growth before crediting it with much.

• Singapore remains the group's main revenue contributor, accounting for 46% of revenue in FY26 (S$192.9m, +1.3% YoY). Adjusted EBITDA was S$46.8m, down 4% from FY25; however, this segment still accounts for most of TMG’s core operating profitability (56.7% of adjusted EBITDA). As highlighted in our previous updates, TMG’s Singapore segment continues to trade declining patient volumes (both outpatient and inpatient) for an increase in average bill sizes across the board. Total billing (number of patients x average bill size) grew 6.2% YoY for outpatient and 10.7% YoY for inpatient, providing firm support for the segment’s revenue. Looking ahead, we expect Singapore to remain the earnings anchor for the group.

Free cash flow recovered, but net finance cost still absorbs nearly all of it

TMG’s cash generation improved for FY26. Net operating cash flow (OCF) rose 17.5% YoY to S$71.0m for FY26 (FY25: S$60.4m) on the back of stronger underlying earnings. Concurrently, capital expenditure (capex) declined 25.1% YoY to S$20.0m, supporting management’s guidance of a shift towards a normalised capex phase after fully consolidating the FV hospital acquisition in Vietnam.

As a result of lower capex, free cash flow ("FCF") surged 51.3% YoY to S$51.0m in FY26 (FY25: S$33.7m). As bondholders, we read this as evidence that the operational recovery we have flagged previously is taking hold, particularly against the -36.5% YoY FCF decline from FY24 to FY25. That said, the improvement should be kept in perspective. After accounting for S$47.4m in net finance costs, FCF stands at S$3+m; while the trend is clearly better, we highlight that TMG’s FCF generation has just reached the point of covering its own debt service.  Looking ahead, we expect cash generation to be stable for TMG, with scope for further improvement should its Vietnam operations ramp up due to the provision of higher-margin services while Singapore and Malaysia operations remain resilient.

Refinancing is likely for upcoming near-term maturity

As of 30 June 2026, TMG held S$113.1m in cash and short-term deposits (excluding S$8.0m in pledged deposits). TMG’s liquidity position, combined with its improvement in cash generation, still falls short of covering the group’s immediate obligations, with S$201.8m due in the next twelve months. Of the S$201.8m, we note that S$175m is its bonds due in May 2027. While current available liquidity does not fully cover this maturity, TMG has a proven track record of managing its capital structure by refinancing existing debt through new bond issuances.  We believe there is a fair chance TMG taps the debt market to refinance its upcoming immediate obligations.

Debt levels have stabilised but remain elevated

TMG’s gross debt remained steady around S$1.1b, hovering around the S$1+b mark over the past three years.

Net debt to Adjusted EBITDA ratio moderated to 12.1x as of 30 June 2026 (30 June 2025: 13.1x), driven by faster growth in Adjusted EBITDA compared to a modest pickup in net debt. Net debt/equity ticked up slightly to 1.9x (FY25: 1.8x) due to a modest write-down in its Vietnam business ($15.2m). Do note that leverage metrics (net debt to tangible equity), excluding the significant goodwill due to the Vietnam acquisition, will read significantly higher than these headline metrics. We stress that TMG’s capital structure remains highly leveraged, and hence the safety margin for the 2027-2029 bonds relies heavily on the group’s continued ability to produce resilient cash flows and its ability to refinance its existing debt through new bond issuances.

While the improvement in the group’s ability to generate cash flows supports its credit profile, the lack of updates surrounding its Johor Hospital and the upcoming refinancing risk remain key credit events that require monitoring.

TMG’s interest coverage (Adjusted EBITDA / finance costs) saw a slight improvement to 1.7x compared to FY25’s 1.3x, primarily reflecting both a stronger Adjusted EBITDA and a decline in finance costs recorded for FY26.

Looking ahead, the Group’s outstanding 2028-2029 bonds are expected to incur annual interest costs of S$18.2m. Should TMG refinance its 2027 bonds at yields around ~3.5+% (where its 2029 bonds are currently trading), its annual interest obligations could benefit from a lower coupon, strengthening both its bottom line and interest coverage.

Recommendations

On balance, we hold a neutral view on TMG’s credit profile: operationally, FY26 was a decent year as Malaysia stepped up in EBITDA contribution and FCF generation recovered, although the delay in its Johor Bay project is not ideal. Net finance costs still consume a significant portion of FCF and debt levels remain high. While we do not expect a default today, the risks are further elevated (compared to our last updates) given the group’s high gearing position.

At yields in the 2.4% to mid-3% range, we revise our view on its outstanding 2027-2029 bonds to fairly priced. In an environment of rising benchmark rates, TMG’s bonds trade at yields near those of other unrated SGD bonds of similar maturity; in particular, these yields are similar to its dental peer Q&M, which we recently covered here:

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In general, TMG’s outstanding bonds offer yields-to-worst from 2.44% to 3.66% with average tenors ranging from 0.6y to 3.1y. Against comparable Singapore sovereign bonds, TMG’s bonds offer a yield spread of 80+bps to 170+bps; we think these yield premiums offer fair compensation to bondholders given the group’s underlying operating improvement against its near-term refinancing risk and the uncertainty around the schedule of its Johor Bay project.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in TMGSP 5.500% 31May2028 Corp (SGD), TMGSP 4.650% 29Oct2029 Corp (SGD), and the analyst who produced this report holds a NIL position in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.