Raffles Medical Group’s 2Q15 results were broadly in line with our expectations, despite 1H15 bottom-line making up about 42.5% of FY15F, as 2H is usually the stronger period. Waning medical tourism could become a drawback as we see hospital services being driven more by local demand this quarter. Looking ahead, the group is building sustainable growth with its new medical centre at Shaw Centre, Raffles Holland V, Raffles Hospital extension as well as its Shanghai hospital project. We are keeping our forecasts largely unchanged. We acknowledge that RFMD’s prospects warrant a certain premium, however its share price run-up since May has led to even higher valuations now. As we lift our peg to 33.5x FY15/16F PE in consideration of the group’s re-rating and growth potential, our fair value estimate is raised to S$4.59 (previous: S$4.17). Maintain HOLD on limited upside.
2H usually stronger
Raffles Medical Group’s (RFMD) 2Q15 revenue rose 7.2% YoY to S$99.3m, forming 23.6% of our FY15 forecast. This was on the back of growth in both its healthcare services and hospital services by 5.7% and 6.6% respectively. Healthcare services division had lower insurance revenue as these contracts are mostly signed in 1Q. The hospital services division was driven more by local demand this quarter, as waning medical tourism becomes a drawback. Higher staff costs (2Q: +9.4%) and operating lease expenses (2Q: +19.8%) continued to be incurred. As a result, PATMI was up 2.2% to S$15.9m, making up 21.9% of our full-year forecast. While 1H15 bottom-line constituted about 42.5% of FY15F, 2H is usually the stronger period. The group also declared a DPS of 1.5 S-cents, similar to last year.
Building sustainable growth
The Emergency Care Collaboration with the Ministry of Health has started since June this year, and the group has a new multi-service centre at Shaw Centre (17.5k sq ft) operating from June as well, whereby management stated that this is equivalent to opening ~30 clinics. Looking ahead, Raffles Holland V is on track for completion by 1Q16. But Raffles Hospital extension will see a delay in its opening to 2Q17 instead of 1Q17 due to construction issues.
Finalizing plans for Shanghai hospital project
To support growth for its future Shanghai hospital, which is slated to be ready by mid-2018, we understand that RFMD plans to open 1-2 more medical centres in Shanghai. The group is currently finalising plans for the hospital, and construction should start by early next year.
Maintain HOLD
We are keeping our forecasts largely unchanged. We acknowledge that RFMD’s prospects warrant a certain premium, however its share price run-up since May has resulted in even higher valuations now. As we lift our peg to 33.5x FY15/16F PE in consideration of the group’s re-rating and growth potential, our fair value estimate is raised to S$4.59 (previous: S$4.17). Maintain HOLD on limited upside.
Raffles Medical Group’s (RFMD) 2Q15 revenue rose 7.2% YoY to S$99.3m, forming 23.6% of our FY15 forecast. This was on the back of growth in both its healthcare services and hospital services by 5.7% and 6.6% respectively. Healthcare services division had lower insurance revenue as these contracts are mostly signed in 1Q. The hospital services division was driven more by local demand this quarter, as waning medical tourism becomes a drawback. Higher staff costs (2Q: +9.4%) and operating lease expenses (2Q: +19.8%) continued to be incurred. As a result, PATMI was up 2.2% to S$15.9m, making up 21.9% of our full-year forecast. While 1H15 bottom-line constituted about 42.5% of FY15F, 2H is usually the stronger period. The group also declared a DPS of 1.5 S-cents, similar to last year.
Building sustainable growth
The Emergency Care Collaboration with the Ministry of Health has started since June this year, and the group has a new multi-service centre at Shaw Centre (17.5k sq ft) operating from June as well, whereby management stated that this is equivalent to opening ~30 clinics. Looking ahead, Raffles Holland V is on track for completion by 1Q16. But Raffles Hospital extension will see a delay in its opening to 2Q17 instead of 1Q17 due to construction issues.
Finalizing plans for Shanghai hospital project
To support growth for its future Shanghai hospital, which is slated to be ready by mid-2018, we understand that RFMD plans to open 1-2 more medical centres in Shanghai. The group is currently finalising plans for the hospital, and construction should start by early next year.
Maintain HOLD
We are keeping our forecasts largely unchanged. We acknowledge that RFMD’s prospects warrant a certain premium, however its share price run-up since May has resulted in even higher valuations now. As we lift our peg to 33.5x FY15/16F PE in consideration of the group’s re-rating and growth potential, our fair value estimate is raised to S$4.59 (previous: S$4.17). Maintain HOLD on limited upside.
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