Raffles Medical Group (RMG) reported 3Q12 PATMI of S$12.6m (+6.6% YoY) on the back of a 13.9% YoY increase in revenue to S$78.7m, such that 9M12 PATMI and revenue formed 68.0% and 73.3% of our FY12 forecasts, respectively. Revenue met our expectations but PATMI was a tad below due to higher-than-expected operating expenses. Regarding the unsuccessful application for the change of use of its commercial podium for medical clinics, we understand that concerns over traffic congestion in the area were one of the reasons for the rejection. RMG would continue to work closely with the relevant authorities on this. We trim our FY12F PATMI estimates by 2.5% on lower margin assumptions but retain our FY13F forecasts as RMG’s staff cost pressures were driven largely by headcount expansion in anticipation of its enlarged operations, which have yet to fully contribute to its topline. Maintain BUY and S$2.82 fair value estimate (24x FY13F EPS).
3Q12 PATMI a tad below expectations
Raffles Medical Group (RMG) reported its 3Q12 results with revenue meeting our expectations but PATMI was slightly below due to higher-than-expected operating expenses. Revenue rose 13.9% YoY and 2.4% QoQ to S$78.7m. PATMI increased 6.6% YoY and 1.2% QoQ to S$12.6m. Growth was driven by a higher patient load as RMG continued to expand the depth and breadth of its specialist services. Both RMG’s core divisions contributed positively to its topline increase, with its Hospital Services and Healthcare Services segments growing 14.5% and 14.8% YoY, respectively. Its revenue growth was also driven equally by volume and ASP increase. For 9M12, revenue jumped 14.0% to S$228.6m, forming 73.3% of our full-year estimates; while PATMI increased 8.0% to S$36.6m, or 68.0% of our FY12 forecast. 4Q is typically RMG’s strongest quarter and we expect this trend to continue in FY12.
Some delay in new Specialist Centre commencement
We understand that one of the reasons for the rejection of RMG’s application for the change of use of its commercial podium at 30 Bideford Road for medical clinics was due to concerns over traffic congestion in the area. Management said that it would work with the relevant authorities to amend some of its plans, including utilising some of its floor space for F&B and pharmacies for example instead of entirely for medical practice. While there would likely be some delay in the commencement of its new Specialist Centre, we believe that it is still possible for operations to begin in 1H13 should RMG’s second submission be successful.
Maintain BUY
According to RMG, it has not experienced any impact on its medical tourist numbers despite the uncertain macroeconomic environment. We believe this can be attributed to RMG’s strong franchise value and competitive pricing. We trim our FY12F PATMI estimates by 2.5% on lower margin assumptions but retain our FY13F forecasts as the staff cost pressures were driven largely by headcount expansion in anticipation of its enlarged operations, which have yet to fully contribute to its topline. Maintain BUY and S$2.82 fair value estimate (24x FY13F EPS).
Raffles Medical Group (RMG) reported its 3Q12 results with revenue meeting our expectations but PATMI was slightly below due to higher-than-expected operating expenses. Revenue rose 13.9% YoY and 2.4% QoQ to S$78.7m. PATMI increased 6.6% YoY and 1.2% QoQ to S$12.6m. Growth was driven by a higher patient load as RMG continued to expand the depth and breadth of its specialist services. Both RMG’s core divisions contributed positively to its topline increase, with its Hospital Services and Healthcare Services segments growing 14.5% and 14.8% YoY, respectively. Its revenue growth was also driven equally by volume and ASP increase. For 9M12, revenue jumped 14.0% to S$228.6m, forming 73.3% of our full-year estimates; while PATMI increased 8.0% to S$36.6m, or 68.0% of our FY12 forecast. 4Q is typically RMG’s strongest quarter and we expect this trend to continue in FY12.
Some delay in new Specialist Centre commencement
We understand that one of the reasons for the rejection of RMG’s application for the change of use of its commercial podium at 30 Bideford Road for medical clinics was due to concerns over traffic congestion in the area. Management said that it would work with the relevant authorities to amend some of its plans, including utilising some of its floor space for F&B and pharmacies for example instead of entirely for medical practice. While there would likely be some delay in the commencement of its new Specialist Centre, we believe that it is still possible for operations to begin in 1H13 should RMG’s second submission be successful.
Maintain BUY
According to RMG, it has not experienced any impact on its medical tourist numbers despite the uncertain macroeconomic environment. We believe this can be attributed to RMG’s strong franchise value and competitive pricing. We trim our FY12F PATMI estimates by 2.5% on lower margin assumptions but retain our FY13F forecasts as the staff cost pressures were driven largely by headcount expansion in anticipation of its enlarged operations, which have yet to fully contribute to its topline. Maintain BUY and S$2.82 fair value estimate (24x FY13F EPS).
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