-->

Maybank Kim Eng Research 2015-07-27: Raffles Medical - Expansion quarter; to catch up in 2H. Maintain BUY.

Expansion quarter; to catch up in 2H 


  • 2Q15 results in line, 6M15 formed 43% of our FY15E. Completed expansions should help 2H15 to catch up. 
  • NDR well attended, investors are excited in China’s long-term growth. Two new medical centres in Shanghai will be added before the hospital there starts up in 2018. 
  • Maintain BUY and DCF TP of SGD5.40. Expect catalysts from further progress in China & ramp-up of local operations. 


Expansion costs high, expect catch up in 2H15 


  • 2Q15 revenue and earnings grew 7.2% and 2.2%, respectively. 
  • The slower growth was due to increase in staff costs, higher operating lease and depreciation from expansion at Raffles Hospital and new Medical Centre at Shaw Centre in 1H15. 
  • Management highlighted the new 17.5k sf Medical Centre at Shaw Centre is equivalent to 35 clinics and could ramp up quickly. 
  • We note that the increase in staff costs decelerated at 9.4% YoY in 2Q15 vs 15.2% YoY in 1Q15. 
  • Earnings should catch up in 2H15 these expansions ramp up. 
  • Separately, Raffles Hospital’s extension was delayed by three months due to construction issues but other plans are on track. 


Well attended NDR; positive on China 


  • Our post-results NDR was well attended with more than 20 fund managers. 
  • In Dr Loo’s first investor meeting in Singapore after the confirmation of Shanghai project, he shared the vast potential of the project. 
  • He believes Raffles Med’s strong brand name and track record will safeguard the venture’s success. 
  • At stable state, management expects higher ROE than the Singapore’s hospital. 
  • Several China hospital projects are still under discussion and the areas of focus in Shanghai, Beijing and Shenzhen. 
  • Two new medical centres will be established over the next 2 years to support its Shanghai operations. 


Maintain BUY and TP 


  • Maintain BUY and DCF TP at SGD5.40, no change to EPS. 
  • Catalysts will be further progress in China as well as Singapore. 


(John Cheong)

Source: http://www.maybank-ke.com.sg



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......