RAFFLES MEDICAL GROUP LTD
R01.SI
Raffles Medical - Valuation pricing in long-term growth
Maintain HOLD, TP revised to S$1.43.
- We maintain our HOLD recommendation for Raffles Medical with a TP of S$1.43 (including potential value of its Shanghai JV hospital).
- At its current valuation of 36x FY16F PE, the counter has reflected its growth potential, in our view.
- We project growth over the next few years to be a tad slower than its historical average.
Expansion plans in Singapore on track while Shanghai was deferred.
- The progress of its expansion plans in Singapore is on track, with Raffles Holland V opening its doors recently and Raffles Hospital Extension expected to complete in 2017.
- However, we note that its Shanghai Hospital’s completion is now projected to be in late 2018, instead of mid-2018 as was previously expected, and slated to be operational from 2019.
Slower growth in the immediate horizon.
- The group has embarked on an expansion phase with several projects in progress locally and overseas.
- While this should provide it with a growth trajectory over the long term, we expect a period of gestation and forecast a 3-year earnings CAGR of 7%, significantly slower vis-à-vis the 19% rate in the last decade.
Valuation:
- Our target price of S$1.43 is based on its historical average PE of 29x on average FY16F/17F earnings.
- Our estimates include S$0.49/share from the value of its Shanghai greenfield hospital.
Key Risks to Our View:
Economic slowdown.
- While healthcare is considered a defensive sector, private healthcare will nonetheless be impacted by a slowdown in the economy since elective procedures can be deferred or patients can choose public hospitals as a lower cost alternative.
Rachel TAN
DBS Vickers
|
Andy SIM CFA
DBS Vickers
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http://www.dbsvickers.com/
2016-07-04
DBS Vickers
SGX Stock
Analyst Report
1.43
Same
1.43
