SINGAPORE (Aug 7): Raffles Medical Group recently obtained regulatory approvals to enter into the Integrated Shield market, officially launching Raffles Shield, on Aug 1.
“We understand from management that interest for this product is healthy, and it is possible to expect incremental revenue of $10–12.5 million per annum as a result of this,” says OCBC analyst Joseph Ng in a Tuesday report.
On a long-term basis, net margins are expected to be about 5%, while that of the larger insurance business (Raffles Health Insurance) is about 3-4%.
The group has also entered into a strategic partnership with NTUC Income Insurance Company to offer NTUC IncomeShield policyholders access to its panel comprising specialists from Raffles Hospital as well as other private hospitals in Singapore.
“We maintain our assumptions and fair value estimate of $1.26 for now,” says Ng.
Raffles Medical Group’s 2Q18 results were in line with OCBC Investment Research expectations.
Revenue grew 0.1% y-o-y to $120.2 million, constituting 23.7% of OCBC’s full-year forecast.
The group’s healthcare services division saw revenue increase 5.4% y-o-y, buoyed by the addition of new corporate clients and a new contract to provide air borders screening services.
The hospital services division this quarter saw a y-o-y drop of 2.3% in revenue, due to softer than expected demand from foreign patients, even though local patients increased slightly.
Ng says the boost from foreign patient loads in 1Q18 proved to be transient.
In addition, management also did not sound too upbeat about the near-term prospects for this segment, given the relative strength of the S$ against a number of regional currencies, increase in professional fees, as well as availability of medical options regionally that cater to the more price-sensitive patients.
Staff costs dropped 2.4% y-o-y to $60.2 million, on the back of judicious management of variable costs.
PATMI for the group grew 0.8% y-o-y to $16.9 million, which formed 24.9% of OCBC’s full-year forecast.
An interim dividend of 0.5 cents per share has been declared, which is unchanged from that of 2Q17.
As at 1.03pm, shares in Raffles Medical are up 2 cents at $1.11 or 34 times FY19F earnings.
