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Raffles Medical Group lacks near-term catalysts; RHB keeps 'neutral'

Samantha Chiew
Samantha Chiew • 3 min read
Raffles Medical Group lacks near-term catalysts; RHB keeps 'neutral'
RHB keeps 'neutral' on Raffles Medical Group. Photo: Raffles Medical Group
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RHB Group Research is keeping its “neutral” call and $1.06 target price on Raffles Medical Group BSL -

(RMG), as analyst Shekhar Jaiswal is in the view that the group is lacking near-term catalysts.

“While 2024 earnings growth will be driven by improvements in Raffles Medical’s Singapore operations and lower losses from its China unit, longer-term earnings will be driven by its China operations, which are a few years away from breaking even in EBITDA terms,” he says.

“We also await the completion of its Vietnam acquisition (subject to regulatory approval). We see risks of higher operating costs amidst a tight labour market for skilled healthcare workers, a still-low foreign patient load, and losses from the health insurance unit,” he adds.

At its latest annual general meeting (AGM), RMG acknowledged the appreciation of the Singapore dollar against regional currencies, hence impacting Singapore’s position as a medical hub, as healthcare providers in neighbouring countries take advantage of this situation.

While RMG and the other healthcare players in Singapore have to distinguish themselves by offering superior quality care, as well as enhanced treatment and services to regain its position as a preferred medical tourism destination, Jaiswal believes that the lost foreign patient load could remain weak in the near term.

Meanwhile, Jaiswal highlights that RMG’s chairman Dr Loo Choon Yoong has been increasing his stake in the group since late February. His holdings have increased to 54.34% as at end-May from 53.02% early this year. YTD, he has 23.25 million shares, at an average price of $1.03/share.

See also: Grab Holdings ‘undervalued’ despite multiple growth catalysts and levers: Morningstar

The group has also released fresh ESG data. It reported Scope 1 and 2 emissions data for the first time in 2023, making it the baseline year. It is working towards tracking Scope 3 emissions data. It aims to reduce the levels of Scope 1 and Scope 2 emissions by 5% in the medium term (by 2031 and 2040) and by 10% in the long term (beyond 2040). It is also aiming for a 5% reduction in energy consumption intensity, a 5% reduction in water consumption intensity, and a 5% reduction in waste generation intensity by 2035.

“We keep RMG’s ESG score at 3.1 (out of 4) for now, even though we noticed a deterioration in electricity consumption intensity and water consumption intensity in 2023 over 2022, as we await to see its progress towards achieving its recently announced ESG goals. As its ESG score is in line with the country's median ESG score, we ascribe a 0% premium or discount to its assessed fair value as at end-May,” says Jaiswal.

As at 3.30pm, shares in RMG are trading at $1.02.

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