RAFFLES MEDICAL GROUP LTD
R01.SI
Raffles Medical (RFMD SP) - On track for growth
In line, mild boost from acquisition
- FY15 core earnings in line, at 100/102% of our/consensus forecast.
- Core earnings grew 5% YoY, 4Q15’s 12% earnings growth was better than 9M15’s 2%, due to maiden contribution from the newly acquired subsidiary, International SOS (MC Holdings). The acquisition boosted topline growth as well, by 2.5ppt for FY15.
- Net cash remains robust, at SGD54m.
Expansions on track; ramping up smoothly
- All expansion projects are on track, Holland Village Medical Centre has just received TOP and is expected to commence operations in May 2016. Tenants for 30-40% of the space are signing up soon and management is still selecting the right tenant for the rest, to achieve its desired ambience.
- The Raffles Hospital extension project and Shanghai Hospital are progressing smoothly.
- The second hospital project in China is still under discussion.
- New medical centre at Orchard is ramping up smoothly since its opening in Jun 2015, albeit at a 6M15 loss of SGD1.5m, and management expects a breakeven period of 2 years.
Integration year & softer outlook, but still exciting
- We expect FY16 to continue as a year of integration and expansion, as Raffles Medical streamlines the newly-acquired entity, continues to ramp up new projects and hire staff ahead of its hospital extension and new Shanghai Hospital.
- Also, management expects a softer outlook for medical tourism, on the back of strong SGD and low oil prices.
- Against the lacklustre environment, we remain confident in the longer-term outlook, as Raffles Medical has taken active steps to attract more foreign patients from non-traditional markets such as Vietnam, Cambodia and China, via International SOS.
- For China expansion, management highlighted its comprehensive staff strength of 50 doctors in the country, recruitment, training and patient referral strategy.
Maintain BUY; catalysts from more expansions
- We reduce our DCF TP (WACC 8.1%/6.3% for SG/CHN) to SGD5.20 from SGD5.22 after cutting EPS by 2-5% for FY16-17, to reflect higher integration and expansion costs.
- We expect catalysts from further progress in overseas and local expansion.
John Cheong CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-02-23
Maybank Kim Eng
SGX Stock
Analyst Report
5.20
Down
5.22
