Raffles Medical Group (RMG) reported its 1Q14 results, with both revenue and PATMI increasing by 8.0% YoY to S$87.6m and S$14.6m, such that topline and bottomline formed 23.0% and 21.4% of our FY14 forecasts, respectively. This is within our expectations as 1Q is seasonally RMG’s weakest quarter. RMG has started construction of its commercial building at Holland Village and is finalising the development plans for its Raffles Hospital extension. It is also in continued negotiations with its partners on working out the details for two separate greenfield hospital development projects in China. We keep our forecasts intact and expect RMG to record revenue and core PATMI growth of 11.7% and 12.1% in FY14, respectively. Rolling forward our valuations to 30x blended FY14/15F EPS, we derive a higher fair value estimate of S$3.90 (previously S$3.68). Maintain BUY.
1Q14 results within our expectations
Raffles Medical Group (RMG) reported its 1Q14 results, with both revenue and PATMI increasing by 8.0% YoY to S$87.6m and S$14.6m, such that topline and bottomline formed 23.0% and 21.4% of our FY14 forecasts, respectively. This is within our expectations as 1Q is seasonally RMG’s weakest quarter. On a segmental basis, revenue for RMG’s Healthcare Services division rose 14.3% YoY, aided by the addition of more corporate contracts and increased volume of healthcare insurance services. Revenue for its Hospital Services segment grew by a more modest 4.8% YoY. Management highlighted that it experienced slower growth in its Indonesian patients market, which was likely due to the weak SGD-IDR exchange rate and uncertainties caused by the upcoming presidential elections. Nevertheless, we believe this softness is transient in nature, and RMG will continue to focus on providing high quality curative healthcare services and enhancing its specialist offerings.
Update on expansion plans
RMG has started construction work on its commercial building located at Holland Village in early Apr 2014, and management hopes this will be completed by end 2015. It is also working to finalise the development plans for its Raffles Hospital extension, which will boost its capacity by another 220,000 sf. RMG is targeting construction to commence in early 2H14, with a timeframe of ~24 months to completion. Its local projects have a remaining capital commitment of ~S$240m over the next 2.5 years, which we expect RMG to finance with its internal resources and debt. On the overseas expansion front, RMG is still in negotiations with its partners on working out the details for two separate greenfield hospital development projects in China, with the regulatory framework the main focal point of discussion.
Maintain BUY
We keep our forecasts intact and expect RMG to record revenue and core PATMI growth of 11.7% and 12.1% in FY14, respectively. Rolling forward our valuations to 30x blended FY14/15F EPS, we derive a higher fair value estimate of S$3.90 (previously S$3.68). Maintain BUY.
Raffles Medical Group (RMG) reported its 1Q14 results, with both revenue and PATMI increasing by 8.0% YoY to S$87.6m and S$14.6m, such that topline and bottomline formed 23.0% and 21.4% of our FY14 forecasts, respectively. This is within our expectations as 1Q is seasonally RMG’s weakest quarter. On a segmental basis, revenue for RMG’s Healthcare Services division rose 14.3% YoY, aided by the addition of more corporate contracts and increased volume of healthcare insurance services. Revenue for its Hospital Services segment grew by a more modest 4.8% YoY. Management highlighted that it experienced slower growth in its Indonesian patients market, which was likely due to the weak SGD-IDR exchange rate and uncertainties caused by the upcoming presidential elections. Nevertheless, we believe this softness is transient in nature, and RMG will continue to focus on providing high quality curative healthcare services and enhancing its specialist offerings.
Update on expansion plans
RMG has started construction work on its commercial building located at Holland Village in early Apr 2014, and management hopes this will be completed by end 2015. It is also working to finalise the development plans for its Raffles Hospital extension, which will boost its capacity by another 220,000 sf. RMG is targeting construction to commence in early 2H14, with a timeframe of ~24 months to completion. Its local projects have a remaining capital commitment of ~S$240m over the next 2.5 years, which we expect RMG to finance with its internal resources and debt. On the overseas expansion front, RMG is still in negotiations with its partners on working out the details for two separate greenfield hospital development projects in China, with the regulatory framework the main focal point of discussion.
Maintain BUY
We keep our forecasts intact and expect RMG to record revenue and core PATMI growth of 11.7% and 12.1% in FY14, respectively. Rolling forward our valuations to 30x blended FY14/15F EPS, we derive a higher fair value estimate of S$3.90 (previously S$3.68). Maintain BUY.
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