SINGAPORE (March 29): Maybank Kim Eng Research is reiterating its “buy” call on Raffles Medical Group at an unchanged price target of $1.70, after having hosted the private healthcare provider at its recent Invest ASEAN Singapore Conference.
In a report on Thursday, analyst John Cheong observes that the group’s China operations – specifically, its up-and-coming Shanghai hospital – is progressing well.
The hospital is due to open early 2019; piling works are currently being carried out, and the group’s management is evaluating which contractors to use for the hospital building.
“Management highlighted the exciting potential for its China operations, given the huge population, quality concerns and high spending power. A good example is the high tuition fees for private schools in China, which could cost CNY150k per term,” says Cheong.
The group’s Raffles Hospital extension project in Singapore, too, is on track to open in late 2017. Cheong notes that the hospital’s current capacity utilisation at present remains efficient, due to its tie-up with the government under emergency collaboration care.
“The new Holland Village medical centre has broken even in just seven months and 95% of the space has been committed. For Shaw Centre, it is still loss making, but management aims to achieve break-even in 2017. Medical tourism from the traditional markets has slowed down, but this is slightly offset by increased patients from new markets, including Indochina and China,” observes the analyst.
Cheong also highlights progress made in the restructuring of International SOS (MC Holdings), which the group acquired in 4Q15 as staff costs as a percentage of the company’s revenue has successfully been reduced from 60% to 57% thus far, the target being to grow both the company’s topline while managing staff costs to boost profitability.
“In the near term, there are several headwinds including the restructuring costs of MCH, lacklustre medical tourism and start-up costs of new projects. However, long-term prospects remain sound given its initiative to expand overseas and strong execution track record,” he concludes.
As at 10:55am, shares of Raffles Medical Group are trading flat at $1.41.
