Raffles Medical Group reported its 1Q15 results this morning, which were within our expectations as 1Q is typically the group’s weakest quarter. Driven by higher patient load, revenue grew 8.5% YoY to S$95.0m, forming 22.6% of our FY15 forecast. Due to higher staff costs amid ongoing expansion plans, PATMI was up just 2.9% YoY to ~S$15.0m, which formed 20.6% of our FY15 forecast. Despite the higher expenses incurred this quarter, looking ahead, we anticipate better performance in 2H15 from the new medical centre at Shaw Centre and the Emergency Care Collaboration with Singapore’s Ministry of Health. Hence we are keeping our forecasts at this juncture. As we roll forward our valuations to 30x blended FY15/16F EPS, our fair value estimate has increased to S$4.17 (previous: S$3.91). Maintain HOLD.
1Q15 revenue grew 8.5% YoY
Raffles Medical Group’s 1Q15 results were mostly in-line with expectations as 1Q is typically the group’s weakest quarter. Driven by higher patient load, revenue grew 8.5% YoY to S$95.0m, forming 22.6% of our FY15 forecast. Both the Healthcare and Hospital Services divisions saw its segment revenue increase 13.7% and 6.2% YoY respectively. Notably, under the Healthcare division, the group had attained a sizeable corporate contract in Hong Kong and the insurance business continues to see double digit top-line growth.
Higher expenses hit profitability
The group’s staff costs rose 15.2% YoY, due to the recruitment of about 121 doctors, specialists, nurses and ancillary staff for new and expanded operations at Raffles Hospital as well as upcoming medical centres at Shaw Centre and Raffles Holland V. An additional bonus for nurses stood at S$0.6m for this quarter. As a result of higher expenses, PATMI was up just 2.9% YoY to ~S$15.0m, which formed 20.6% of our FY15 forecast.
Building presence in attractive locations
Management had been focusing on building presence in the central district as the area attracts mid-to-upper class as well as Indonesian tourists. Thus the opening of a new multi-service centre at Shaw Centre in June this year is expected to aid business growth from 2H15 onwards. We also understand that a new GP clinic at Eastpoint Mall has opened today, while Raffles Holland V and Raffles Hospital extension are on track for completion by 1Q16 and 1Q17 respectively.
Maintain HOLD
Despite the higher expenses incurred this quarter, looking ahead, we anticipate better performance in 2H15 from the new medical centre at Shaw Centre and the Emergency Care Collaboration with Ministry of Health. Hence we are keeping our forecasts at this juncture. Rolling forward our valuations to 30x blended FY15/16F EPS, our fair value estimate has increased to S$4.17 (previous: S$3.91). Due to limited upside at current price level, maintain HOLD.
Raffles Medical Group’s 1Q15 results were mostly in-line with expectations as 1Q is typically the group’s weakest quarter. Driven by higher patient load, revenue grew 8.5% YoY to S$95.0m, forming 22.6% of our FY15 forecast. Both the Healthcare and Hospital Services divisions saw its segment revenue increase 13.7% and 6.2% YoY respectively. Notably, under the Healthcare division, the group had attained a sizeable corporate contract in Hong Kong and the insurance business continues to see double digit top-line growth.
Higher expenses hit profitability
The group’s staff costs rose 15.2% YoY, due to the recruitment of about 121 doctors, specialists, nurses and ancillary staff for new and expanded operations at Raffles Hospital as well as upcoming medical centres at Shaw Centre and Raffles Holland V. An additional bonus for nurses stood at S$0.6m for this quarter. As a result of higher expenses, PATMI was up just 2.9% YoY to ~S$15.0m, which formed 20.6% of our FY15 forecast.
Building presence in attractive locations
Management had been focusing on building presence in the central district as the area attracts mid-to-upper class as well as Indonesian tourists. Thus the opening of a new multi-service centre at Shaw Centre in June this year is expected to aid business growth from 2H15 onwards. We also understand that a new GP clinic at Eastpoint Mall has opened today, while Raffles Holland V and Raffles Hospital extension are on track for completion by 1Q16 and 1Q17 respectively.
Maintain HOLD
Despite the higher expenses incurred this quarter, looking ahead, we anticipate better performance in 2H15 from the new medical centre at Shaw Centre and the Emergency Care Collaboration with Ministry of Health. Hence we are keeping our forecasts at this juncture. Rolling forward our valuations to 30x blended FY15/16F EPS, our fair value estimate has increased to S$4.17 (previous: S$3.91). Due to limited upside at current price level, maintain HOLD.
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