With the relocation and expansion of 15 specialist centres to the new RafflesSpecialistCentre, RafflesHospital is now undergoing refurbishment. By 3Q18, the Group will have expanded bed capacity and outpatient primary care centres to cater for the growing local and foreign demand.
We expect staff costs to remain above 50% of Group’s revenue in coming years when patient volumes picks up in RafflesSpecialistCentre, MCH (MC Holdings) and the two new hospitals in China.
Outlook remains positive despite medium-term margin pressures from higher staff costs and start-up costs from the gestation of its two new China hospitals.
Maintained Accumulate with unchanged TP of S$1.32
We remain upbeat on the potential growth that these new hospitals in China would bring to the Group: (i) Diversification with a higher contribution for overseas operation; and (ii) Tapping into China’s growth.
Potential re-rating catalysts: (i) Stronger demand from the MOH partnership; and (ii) Better than expected performance in China hospitals
Figure 1: Peers Comparison
Raffles Medical Group is currently trading at 30.5x forward PER, which is a 13.6% discount to its regional peers’ average of 35.3x.
Its FY18e dividend yield of 1.9% is higher than its regional peers’ average of 1.6%.