CFA Society Singapore
SINGAPORE (Sept 25): Raffles Medical Group last month signed an MoU with China Taiping Insurance Group (CTIG) to jointly provide medical insurance solutions as well as healthcare management services and explore health-linked property opportunities.
Apart from working capital, Raffles Medical would not be required to put up any significant capex, given that the initial costs would likely be confined to the joint marketing of products.
The way analysts see it, this collaboration is a strategic and logical move for Raffles Medical, given the group’s existing clinics in China, as well as the upcoming opening of Raffles Hospital Chongqing and Raffles Hospital Shanghai in 4Q18 and 2H19, respectively.
Also, the benefits to Raffles Medical should be seen on home turf as well. China Taiping has overseas businesses in the UK, Indonesia and Singapore, which are very much in-line with the Chinese government’s Belt and Road initiative, and the group is looking at ways to proactively provide risk protection and services for Chinese businesses overseas.
To that end, this newly-minted relationship with Raffles Medical could help drive both individual and corporate loads to the latter’s network of island-wide clinics as well as to Raffles Hospital.
At the last National Day Rally speech, Prime Minister Lee Hsien Loong touched on a number of key points pertaining to healthcare in Singapore. These included an expanded Community Health Assist Scheme (CHAS) to cover all Singaporeans with chronic conditions, a Merdeka Generation Package for those born between 1950-1959, and six more polyclinics by 2023.
Interestingly, Raffles Medical’s share price fell 4.7% the next day, despite the general policy direction at making healthcare more affordable for more segments of society.
In OCBC’s opinion, there might have been of some concern, given the possibility of it providing more competition to Raffles Medical’s clinics, says analyst Joseph Ng in a Monday report.
However, this move is no surprise, given that a similar announcement was already made in the March 2018 Committee of Supply debate. As such, we think the new supply of healthcare provision has and should already been well internalised by the market.
“We maintain our fair value estimate of $1.26 for now,” says Ng.