TMC ... Jul11

Inet Research

1. Apr-May 2011/17m May 2011 Results Highlight
= TMC Life (TMC) released two-month results to 31 May 2011 as the group changed its year-end from 31 Dec to 31 May recently. Revenue was within our expectations but losses were deeper than our earlier projections due to inventory adjustments and additional expenses for staff benefits – excluding the two items, TMC would have made a small profit at the operating level.

= Sharp losses incurred during the 17-month period to 31 May 2011 were largely attributable to impairment charges, write-offs and provisions, which were taken in 4Q 2010.

= Management indicated in the results announcement that it is cautiously optimistic of further revenue growth with higher number of specialist doctors and support staff at the hospital and fertility centres, as well as ongoing promotional and marketing activities both locally and around the region. With the cleaning up of
the group’s balance sheet and stricter cost control, TMC is expected to turnaround in FY12.

= We value TMC at RM0.50 per share, based on an RNAV method in the absence of meaningful profits at this stage. We assumed a 17x PER on TMC’s profitable fertility operations (10% discount to local and regional peers), added our estimated book value for the hospital and deducted the group’s estimated net debt position. Our HOLD recommendation stays.

2. Key Investment Risks
Key investment risks for TMC Life (TMC) include:
a) Slower economic growth due to inflationary pressures and global uncertainties, which would affect
existing and potential patients’ spending power on the group’s fertility treatment services and private
healthcare services;
b) Migration of key specialist doctors and medical support staff;
c) Rising cost of training and retaining key medical support staff;
d) Intense competition from other local and regional healthcare providers.

3. Recent Developments
On 18 Sep 2008, TMC entered into an MOU with Berjaya Corporation Berhad and Viet Ha Corporation to
establish a formal relationship in order to jointly carry out activities relating to the design, construction,
furnishing, equipping and operating of a hospital in or near Hanoi, Vietnam.

On 17 Sep 2009 the parties to the MOU mutually agreed to extend the duration of the MOU for a further period of 12 months from 17 Sep 2009 until 17 Sep 2010.

On 17 Sep 2010, TMC announced that the parties to the MOU have mutually extended the duration of the
MOU for a further period of 12 months from 17 Sep 2010 until 17 Sep 2011.

On 20 Sep 2010, the group appointed Mr Francis Lim Poon Thoo as CEO. Mr Francis Lim was previously
group executive director of Singapore listed healthcare group Health Management International Limited (Jul
2002 until May 2010) and executive director/CEO of Mahkota Medical Centre Sdn Bhd (Nov 1998 until May 2010)

On 30 Sep 2010, TMC announced the resignation of the following:
1) Mr Amos Siew Boon Yeong, executive director;
2) Dato’ Wenddi Anne Chong Wai Yeng, executive director;
3) Dato’ Robin Tan Yeong Ching, director; and
4) Yeoh Cheng Lee, alternate director.

On 1 Oct 2010, TMC announced the termination of Tropicana Wellness Sdn Bhd as the marketing agent of the Tropicana Wellness Programme, the group’s subscription-based healthcare programme with effect from 21 Dec 2010. In the announcement, TMC indicated that the group will take over the marketing of the programme internally.\

On 12 Jan 2011, TMC announced the appointment of the following:
1) Dr. Wong Chiang Yin, a Singaporean, as executive director.
Dr. Wong was previously the CEO of Bright Vision Hospital, executive director at Pantai Holdings
Berhad, COO at Changi General Hospital, and COO at Singapore General Hospital;

2) Dr. Lee G. Lam, a Canadian national, as non-executive director.
Dr. Lam has over 28 years’ experience in multinational general management, corporate governances,
investment banking and direct investments. He is currently Chairman of Monte Jade Science and
Technology Association of Hong Kong;

3) Gary Ho Kuat Fong, an Australian national, as non-executive director. Mr Ho is also a non-executive director of UPP Holdings Ltd.; and

4) Dr. Chan Boon Kheng, a Singaporean, as non-executive director.
Dr. Chan was an advisor and interim group CEO of Pantai Holdings Berhad. He also served as an
advisor to various healthcare companies including Mubadala Development Company based in Abu
Dhabi and was CEO and general manager of East Shore Hospital in Singapore under Parkway
Healthcare.