China – Chongqing and Shanghai hospitals
Management maintained EBITDA loss guidance for both hospitals of S$8-10mn in the first year and S$4-5mn in the second year before breaking even in the third year of operation.
RafflesHospital Chongqing commenced operations since 2 January 2019 and is currently operating 24/7 and staffed by a team of multi-disciplinary international and local doctors. The hospital started with 150 beds with the potential to be a 700-bed hospital. It is located in the New North District of the Liangjiang New Area.
RafflesHospital Shanghai should commence operations in January 2020. It will be a 400-bed tertiary hospital located between Shanghai Pudong International Airport and Shanghai Hongqiao International Airport in the heart of Pudong New Bund, a free trade zone.
Maintain Neutral with an unchanged TP of S$1.09
The Group’s bet on China is to leverage on the massive population size and rising affluence of its people. However, the key risks to our forecasts are longer than expected gestation period and margin pressures if the Group is unable to scale patient volumes in China. With proper and delicate execution, the China venture could bring long-term growth prospects for the Group.
Potential re-rating catalysts: (i) Stronger demand from the MOH partnership; (ii) Shorter than expected gestation period in China hospitals; (iii) higher investment-holding revenue growth with the remaining 80% of vacant spaces leased out.