SINGAPORE (April 26): OCBC Investment Research is downgrading Raffles Medical Group to “hold” because of the limited upside from its current share price, although it is sticking to its $4.72 fair value estimate.

In a Tuesday report, lead analyst Jodie Foo says Raffles Medical’s 1Q results largely met OCBC’s expectations.

Revenue grew 23% to $116.9 million on year, forming 24% of the research house’s full-year estimate, as both the Healthcare and Hospital Services divisions saw their segment revenue increase 36.3% and 15.2% respectively.

This was due to higher patient load, better contribution from more specialist consultants as well as a $10.8 million contribution from International SOS (MC Holdings) and its subsidiaries (MCH).

However, due to higher costs from several fronts, PATMI was up 3.7% to $15.5 million, meeting 19% of OCBC’s FY16 forecast.

“Higher staff costs (+27.5%), depreciation costs (+19.7%) and operating lease expenses (+53.2%) were incurred. As previously mentioned, management is looking to manage MCH’s staff costs, which currently comprise about 58-60% of its revenue,” says Foo.

Meanwhile, the group says the committed tenants of its Holland Village Mall project are now in the fitting-out stage and the mall is expected to start operations by June.

Management also expects its Shanghai hospital to be ready by end Dec 2018, due to a long approval process in China.

At 11.26am, Raffles Medical is up 0.22% at $4.56.