RAFFLES MEDICAL GROUP LTD
R01.SI
Raffles Medical Group - Limited Upside For Now, Downgrade To HOLD
- Delays at Shanghai hospital
- Share rose 16% from recent trough
- Ex-entitlement on 9 May
1Q16 results met expectations
- Raffles Medical Group’s 1Q16 results largely met our expectations, with 1Q typically being the weakest quarter.
- Revenue grew 23% YoY to S$116.9m, forming 24% of our full year estimate, as both the Healthcare and Hospital Services divisions saw their segment revenue increase 36.3% and 15.2% respectively. This was driven by higher patient load, better contribution from more specialist consultants as well as a ~S$10.8m contribution from International SOS (MC Holdings) and its subsidiaries (MCH).
- However, due to higher costs from several fronts, PATMI was up 3.7% to S$15.5m, meeting 19% of our FY16 forecast.
Room for improvement from MCH
- Higher staff costs (+27.5%), depreciation costs (+19.7%) and operating lease expenses (+53.2%) were incurred. As previously mentioned, management is looking to manage MCH’s staff costs, which currently comprise about 58-60% of its revenue.
- Besides rebranding initiatives for MCH clinics to uphold the Raffles Medical branding, there is further room to drive growth and improve productivity as the clinics are currently under-utilised and were only serving expatriate patients thus they are opening up to serve non-members as well.
Share has done well; downgrading to hold
- On the group’s Holland Village Mall project, the committed tenants are now in the fitting out stage and the mall is expected to start operations by June 2016. About 9k sq ft on the 5th level of the mall will house a range of clinics including specialist paediatrics, obstetrics and gynaecology as well as radiology.
- As for the Shanghai hospital, due to a long approval process in China, management now expects the hospital to be ready by 31 Dec 2018.
- With our estimates mostly unchanged, we are keeping our fair value estimate of S$4.72, but in view of the limited upside from its current share price, we downgrade the stock to a HOLD.
- The one-to-three share split has been approved by shareholders, as such the last trading day on a pre-subdivision basis is 6 May and the ex- entitlement date for the share split will be 9 May.
- The stock will also go ex-dividend for 4.5 S-cents on 9 May.
Jodie Foo
OCBC Securities
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http://www.ocbcresearch.com/
2016-04-26
OCBC Securities
SGX Stock
Analyst Report
4.72
Same
4.72
