Raffles Medical Group (RFMD SP)
Current shareprice: SGD$1.00
Target price: SGD$1.05
Potential yield: +5%
We maintain a BUY action on this counter. Let’s take a look at the insights of the healthcare company.
Raffles Medical Group Ltd is an integrated healthcare provider, operating medical facilities in approximately 13 cities in Singapore, China, Japan, Vietnam and Cambodia. The principal activities of the Company are the operation of medical clinics and other general medical services. The Company’s segments include Healthcare services, Hospital services and Investment holdings. The Healthcare services segment is engaged in the operations of medical clinics and other general medical services; provision of health insurance, trading in pharmaceutical and nutraceutical products and diagnostic equipment, and provision of management and consultancy services. The Hospital services segment is engaged in the provision of specialized medical services and operation of hospitals, and the business of medical laboratories and imaging centers. Its subsidiaries include Raffles Hospital Pte Ltd, Raffles Diagnostica Pte Ltd, Raffles Research Labs Pte Ltd and Raffles Chinese Medicine Pte Ltd.
Profit and revenue:
Raffles Medical Group (RMG) announced net profit of approximately S$13m for 3Q19, down almost 17%. Revenue growth however, remains strong. 3Q19 turnover increased above 6%. Additionally, revenue for Healthcare Services division recorded an increase of 9% while the revenue of Hospital Services division increased by 7%. Management noted that the resident local patient load remains strong. The group continues to show effective cost control, with staff costs/turnover ratio rising decently, and was comparable on 9M basis. Overall, operating margin for 3Q19 was 13%, down slightly throughout the year.
While patient load remains mostly outpatient in nature, Raffles Chongqing is gradually adding on its medical
disciplinaries to the hospital, including gynaecology, dental, ENT (ear, nose, throat). Some positives include seeing a good proportion of repeat patients, a testament to the
quality of services provided, while also continuing promotional activities to draw in new patients. Management noted that there were some disappointments, including the slower pace of the regulatory process in China. Its Yibao (local medical insurance) is still in the process of implementation, along with the approximately 100 public beds designated.
While the newly established hospital Chongqing is a slight drag, other areas of operations have remained resilient. For one, MCH, its subsidiary of overseas clinics has seen an improvement noted from the reduction in minority interest losses. In addition, its foreign patient load at Raffles Hospital remains flat, comparatively better than the decline seen in the industry.
Shanghai hospital in 1H20:
With the building structure completed, the group is progressing with the interior fit-out and purchase of major equipment and is looking at opening the hospital between Mar/Apr 20. Recruitment of the hospital opening team has also begun and initial operations may involve some RMG doctors from Chongqing. Additionally, RMG has an established clinic in Shanghai, which can aid in referral of patients. A larger expat market in Shanghai can also avoid some of the issues faced from local medical insurance.
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*** This report is neither an offer nor the solicitation of an offer to sell or purchase any investment. Comments are based on information obtained from sources believed to be reliable but Fides Assets makes no representation and accepts no responsibility or liability as to its completeness or accuracy.
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