Ramping up nicely
- Expansion at home to contribute more meaningfully from 2H15. China offers new growth chapter.
- Minimal impact from new hospital competition. Stabilising SGD should bring back medical tourism.
- Maintain BUY with DCF TP raised to SGD5.40 from SGD5.10 for higher terminal growth rate. Expect catalysts from further progress in China & local ramp-up.
Local initiatives ramping up
- We recently touched base with RFMD, which shared that all its initiatives started in 1H15 should contribute more meaningfully in 2H. These include:
- a new floor at Raffles Hospital;
- a new medical centre in Orchard; and
- emergency-care collaboration (ECC) with the government to treat subsidised patients.
- Its Holland V medical centre and Raffles Hospital extension are also on course for completion in 1Q16 and 1Q17, respectively.
- We expect staff costs to remain high, as recruitment intensifies ahead of new projects in Singapore.
- Elsewhere, we believe its Shanghai Hospital in 2018 will open doors to a more exciting market.
Mild impact from competition; currency stabilising
- We believe that new private and public hospitals pose a limited threat to Raffles Med as its group practice distinguishes it from the other private players while public hospitals appeal to a different clientele.
- We note that private hospitals’ share of patient admissions grew in 2010-14 even when public bed supply surged.
- In medical tourism, we believe Singapore’s edge in non-elective quaternary procedures differentiates its medical sector from regional peers’.
- We also note that IDR’s depreciation against SGD has eased to 2.3% YTD from 11.1-12.2% in 2013-14.
- We raise our DCF TP (WACC 8.1%/6.3% for SG/CHN) to SGD5.40 from SGD5.10 after lifting our terminal growth rate to 2.5% from 2.0% in SG for stronger long-term growth prospects.
- Catalysts are expected from further progress in China as well as Singapore.
(John Cheong)
Source: http://www.maybank-ke.com.sg
