Case Study on Raffles Medical Group (SGX: BSL)

Date: 10 October 2018

Raffles Medical Group was founded in 1976, when Dr Loo Choon Yong and Dr Alfred Loh Wee Tiong acquired an existing medical practice with two clinics. The group expanded rapidly and incorporated to promote the Group's identity and highlight its comprehensive range of healthcare services. In 1997, the Company entered into a joint venture with Pidemco Land to retrofit Blanco Court into Raffles Hospital, which was operational since March 2001. Currently, Raffles Medical Group (SGX: RafflesMG) is a leading integrated private healthcare provider in Singapore and the region. The Group operates its businesses through brands and subsidiaries which include Raffles Medical clinics, the largest network of private family medicine centres in Singapore. The Group also possess clinic network in Hong Kong and Shanghai. Raffles Hospital, the flagship of Raffles Medical Group, is a private tertiary hospital located in the heart of Singapore offering a wide range of specialist medical and diagnostic services for both inpatients and outpatients.

Raffles Medical Group is currently trading at a 30% down ($1.090 as of 10 Oct) from its high of $1.65 in 2015. Is now a good time to buy in and what’s the value of the company?

Before we start to analyse the financials of the company, what caught our attention to this stock is the insider trades on just 28 September 2018.

The question lies with whether they are buying based on favourable future outlook or the recent price volatility.

Now, let’s look at ShareInvestor’s analysis of their financial at a glance:

Looking deeper for more insights:

At its peak in 2016, the revenue growth was at 15.36%. This revenue was supported by healthcare service which grew 30.8% and hospital service by 6.3%.

However, at the same time, the cost of revenue is at its highest of 17%, including higher staff costs to cater to the expansion of existing business operation plus the new medical centre in Raffles Holland V and acquisitions in 4Q 2015.

Looking at its performance for 2017, the results shows an inch of upside by 0.8%. The performer of 2016 – healthcare service division saw a dip of revenue by 1.6% mainly due to higher local patient count and lower renewal of international healthcare plans for expatriates.

Raffles Medical Group saw a significant dip in their dividend from 6.00 cents per share in 2015 to 2.00 cents per share in 2016.

In Q4 2017, a final dividend of 1.75 cents per share was declared, bringing 2017’s total dividend to 2.25 cents per share, a 12.5% increase from 2016.

Even with the current economic outlook and barring unforeseen circumstances, the Directors are still expecting the Group to remain profitable in 2018, especially with the opening of Raffles Specialist Centre that will enable growth in depth and breadth of their services over the next few years to serve more patients.

However, as retail investors, what does it mean for you to hold shares of Raffles Medical Group?

With all plans in place, are the analysts calling it a ‘buy’? Leaving you with ShareInvestor’s consensus estimates.

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