RAFFLES MEDICAL GROUP LTD
R01.SI
Raffles Medical Group - In Good Health
- Raffles Medical managed to achieve 5% recurring profit growth in FY15 despite a foreign patient load slowdown in a challenging environment.
- We see short-term earnings risk in 2016 as the company incurs build-up costs in its new projects. However, this is a minor inconvenience as it heads into an exciting 3-year growth period.
- We expect share price to continue re-rating as the investor base broadens along with its regional operations.
- Maintain BUY with a SGD5.10 TP (from SGD5.40, 20% upside)
Revenue jump in 4Q15 mostly due to International SOS.
- This acquisition was consolidated from 16 Oct 2015 and accounted for a substantial part of Raffles Medical Group’s (Raffles Medical) 15% YoY growth in revenue in 4Q15.
- However, overall profitability is negligible due to a higher cost base.
- Management aims to integrate its international clinics into its network and increase profitability via benefit of scale.
Higher dividends, stock split proposed.
- Full-year dividend was increased to 6 cents/share (5.5 cents previously).
- Raffles Medical has also proposed a 1-3 stock split that is in line with investor feedback.
Expansion plans on track.
- The Raffles Holland Village (Holland V) project is on track for temporary occupation permit (TOP) by March, with a strong tenant take-up expected. This project is to contribute rental yield immediately.
- Foundation works at the Raffles Hospital extension were completed by end 2015 and it remains on track for full completion by 2017.
Maintain BUY.
- We keep our forecasts largely unchanged and introduce FY18 estimates.
- Maintain BUY, with a lower TP of SGD5.10, as we make adjustments to our longer-term assumptions.
- Key risk is execution on its Shanghai hospital project, which is key to the company’s growth strategy.
James Koh
RHB Research
|
http://www.rhbinvest.com.sg/
2016-02-23
RHB Research
SGX Stock
Analyst Report
5.10
Down
5.40
