RAFFLES MEDICAL GROUP LTD
R01.SI
Raffles Medical (RFMD SP) - Exporting Uniquely Singapore Healthcare Brand
Singapore provides solid foundation…
- Founded in 1976 by Dr Loo and Dr Alfred Loh with two clinics in central Singapore, RFMD has grown strength to strength. Today, it operates over 80 clinics in 13 cities in five countries, serving over 2m patients annually.
- Dr Loo's philosophy of "patients come first, profits later" has served stakeholders well, by generating more than 20 years of consistent growth.
- From this foundation, RFMD has expanded overseas. In 2015, it started to construct a 400-bed Shanghai Hospital, acquired International SOS MC Holdings to gain immediate access to 10 cities in three countries, and opened a new medical centre in Osaka, Japan. It aims to generate at least half of its earnings from overseas, up from < 5%.
- Maiden contributions from China are expected in FY18E.
…for breaking into China…
- RFMD is positive on China’s private healthcare industry and the value its “Raffles model” can bring. This emphasises teamwork, transparent pricing, thorough case-auditing and high-quality treatment.
- Management studied the Chinese market for more than three decades before venturing there.
- Now that it has a toehold, it is unlikely to stop at one hospital. We understand that it is in discussions with several parties for projects in Beijing and Shenzhen.
…and expansion in ASEAN…
- Although China will be its main focus, RFMD does not rule out fast growing emerging ASEAN countries. It has dipped its toes in Vietnam and Cambodia through clinic acquisitions and could expand further in these countries after building up market knowledge.
…to sustain its growth
- We are positive on its long-term growth, especially now that it has accelerated overseas expansion.
- We believe its strong track record and brand will mitigate execution risks.
- TP $5.22.
Swing Factors
Upside
- Further progress in second hospital in China, which could be in Shenzhen or other top cities. Shenzhen hospital first announced in Feb 2013.
- Faster-than-expected breakeven for Singapore expansion. Normal breakeven is one year.
- Medical tourism in Singapore could recover from 2015 weakness as RFMD is constantly seeking new source markets.
Downside
- Execution risks for Shanghai hospital, its first outside Singapore.
- Higher-than-expected start-up costs in major expansion markets such as China.
- Structural decline of medical tourism in Singapore.
John Cheong CFA
Maybank Kim Eng
|
http://www.maybank-ke.com.sg/
2016-01-06
Maybank Kim Eng
SGX Stock
Analyst Report
5.22
Same
5.22
