Raffles Medical Group

UOBKayhian on 3 Nov 2014

FY14F PE (x): 30.4
FY15F PE (x): 26.8
Long-term beneficiary of medical tourism. We believe RMG’s hospital expansion in
Singapore will position the group well for the good prospects in medical tourism.
Management shared that while Singapore’s hospital treatments are more expensive
(25- 30%>Thailand, 100%>Malaysia and 3x>India), Singapore will hold its own,
particularly for curative and acute treatments. Conversely, other countries such as
Thailand and Korea are preferred in areas such as aesthetic treatment. Currently, RMG
sees foreign patients from over 100 countries.
Capacity for long-term growth. Maintain BUY with a DCF-based target price of S$4.30
(no change assuming WACC of 7.9% and terminal growth of 2.5%). Our target price of
S$4.30, the implied 2015F PE is 30.3x, close to its +1SD to mean PE of 28.6x but we
think this is deserved, given its strong cash flow generation and resilient business
model. Meanwhile, 2014-16F ROE of 14.2-15.5% are also higher than its long-term
average ROE of 11.5% (1997-2013).