RAFFLES MEDICAL GROUP LTD
R01.SI
Raffles Medical Group Ltd - No surprise is good news
- RMG’s 1H16 revenue and PATMI came in at 51.2% and 44.1% of our FY16 forecasts respectively.
- Expansion on track. Next quarter expects: RafflesMedical Centre Orchard to breakeven and maiden contribution from Raffles Holland V.
- Downgrade to Neutral rating with TP maintained at S$1.62 (S$4.88 pre-share spilt).
Results
- Higher revenue due to increased patient load from more clinics, higher contributions from more specialist consultants, as well as the newly acquired International SOS (MC Holdings) Pte Ltd and its subsidiaries (collectively known as “MCH”). Excluding MCH, top line would have grown by only 8.7% yoy.
- However, higher revenue was offset by higher staff costs (acquisition of MCH and recruitment of more specialist consultants), operating lease and other operating expenses. Operating margin decreased from 19.3% in 2Q15 to 16.8% in 2Q16. Excluding MCH, operating profit would have increased by 6.5% instead of 4.1%.
- Diversifying patient mix, particularly within its foreign patient base. MCH helps to diversify its patient base, feeding to its hospital business in Singapore, and somewhat mitigate the slowing medical tourism.
- The Group declared an interim ordinary dividend of 0.5 Singapore cent per ordinary share for FYE12/16, equivalent to 1.5 Singapore cents pre-share spilt distribution in 2Q15.
How do we view this?
- Operating cash flow remains strong. Its strong net cash balances (S$123.6mn as at 30 June 2016) and continual positive operating cash flow generated from its various business units, should provide
- sufficient funding for the domestic expansion (Raffles Holland V and Raffles Hostpital Extension) and
- sustainable dividend payout.
- Economic growth in Singapore and the region is likely to remain subdued for the rest of 2016, thus translating to a softer healthcare demand in general. However, the diverse and comprehensive services offered, as well as the new facilities, should help to spur top line growth. On the other hand, the Group’s cost-cautious approach should help to normalise its operating margin.
Investment Actions
- We maintain our forecasts and target price of $1.62 based on discounted cash flow (DCF) methodology, but downgrade our call from ‘Accumulate’ to ‘Neutral’ on the back of the recent run-up in prices.
Soh Lin Sin
Phillip Securities
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http://www.poems.com.sg/
2016-07-26
Phillip Securities
SGX Stock
Analyst Report
1.62
Same
1.62
