Raffles Medical Group (RMG) reported 3Q13 revenue and PATMI growth of 8.0% and 10.3% YoY to S$85.1m and S$13.9m, such that 9M13 figures formed 72.8% and 68.7% of our full-year estimates, respectively. This was within our expectations. Looking ahead, RMG is seeking to finalise the negotiations for its proposed China hospital expansion plans with its partners; while the completion of sale of its Thong Sia building in 4Q13 would boost its FY13F net cash balance to S$241m (based on our estimates). We incorporate the gain in sale of the property in our forecasts and our FY13 PATMI estimate is bumped up by 35.2% to S$82.1m. Nevertheless, we view this gain as exceptional in nature and our valuation on RMG is also unaffected as it is premised on 29x FY14F EPS. Maintain BUY and fair value estimate of S$3.61 on RMG.
3Q13 results within our expectations
Raffles Medical Group (RMG) reported its 3Q13 results which were within our expectations. Revenue rose 8.0% YoY to S$85.1m, and this was the first time since 4Q10 in which RMG reported only a single-digit YoY topline increment (average YoY revenue growth was 13.7% from 1Q11 to 2Q13). This was partly due to the absence of the Ministry of Home Affairs’ medical services contract, which expired in end 2012. Excluding this, management highlighted that overall revenue would instead have increased by 12% YoY. PATMI grew 10.3% YoY to S$13.9m, with growth driven largely by a higher patient load and price increment. For 9M13, revenue and PATMI increased 10.7% and 14.0% to S$253.0m and S$41.7m, forming 72.8% and 68.7% of our full-year estimates, respectively. 4Q is traditionally RMG’s strongest quarter and we expect this trend to continue in FY13.
Seeking to finalise its China expansion plans
Regarding the progress for its China expansion plans, RMG highlighted that it hopes to conclude the negotiations with its Chinese counterparts by the end of the year (one proposed hospital in Shanghai and one in Shenzhen). RMG aims to capture the top 20% and 10% of the population in Shanghai and the Pearl River Delta region, respectively, as its potential market. It is also targeting to own a 70% stake in the hospital partnerships.
Maintain BUY
Meanwhile, RMG expects to complete the sale of its Thong Sia building by 31 Oct 2013. We incorporate the gain in sale of the property in our forecasts and our FY13 PATMI estimate is bumped up by 35.2% to S$82.1m. Nevertheless, we view this gain as exceptional in nature and our valuation on RMG is also unaffected as it is premised on 29x FY14F EPS. RMG’s net cash balance will also balloon to S$241m at end FY13, based on our projections (forming ~14% of its current market capitalisation). Maintain BUY and fair value estimate of S$3.61 on RMG.
Raffles Medical Group (RMG) reported its 3Q13 results which were within our expectations. Revenue rose 8.0% YoY to S$85.1m, and this was the first time since 4Q10 in which RMG reported only a single-digit YoY topline increment (average YoY revenue growth was 13.7% from 1Q11 to 2Q13). This was partly due to the absence of the Ministry of Home Affairs’ medical services contract, which expired in end 2012. Excluding this, management highlighted that overall revenue would instead have increased by 12% YoY. PATMI grew 10.3% YoY to S$13.9m, with growth driven largely by a higher patient load and price increment. For 9M13, revenue and PATMI increased 10.7% and 14.0% to S$253.0m and S$41.7m, forming 72.8% and 68.7% of our full-year estimates, respectively. 4Q is traditionally RMG’s strongest quarter and we expect this trend to continue in FY13.
Seeking to finalise its China expansion plans
Regarding the progress for its China expansion plans, RMG highlighted that it hopes to conclude the negotiations with its Chinese counterparts by the end of the year (one proposed hospital in Shanghai and one in Shenzhen). RMG aims to capture the top 20% and 10% of the population in Shanghai and the Pearl River Delta region, respectively, as its potential market. It is also targeting to own a 70% stake in the hospital partnerships.
Maintain BUY
Meanwhile, RMG expects to complete the sale of its Thong Sia building by 31 Oct 2013. We incorporate the gain in sale of the property in our forecasts and our FY13 PATMI estimate is bumped up by 35.2% to S$82.1m. Nevertheless, we view this gain as exceptional in nature and our valuation on RMG is also unaffected as it is premised on 29x FY14F EPS. RMG’s net cash balance will also balloon to S$241m at end FY13, based on our projections (forming ~14% of its current market capitalisation). Maintain BUY and fair value estimate of S$3.61 on RMG.
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