RafflesMed – OCBC

EXPANDING FOR THE FUTURE

Results showcase defensive earnings

Final dividend of 3 S cents declared

Forecasting margin expansion in FY12

4Q11 results within expectations.

Raffles Medical Group (RMG) reported its 4Q11 results which were within our expectations. Revenue rose 13.9% YoY and 4.6% QoQ to S$72.3m. Net profit increased 10.3% YoY and 39.9% QoQ to S$16.5m. For FY11, revenue of S$272.8m represented a 14.1% increase, and just 0.5% shy of our forecast. Reported PATMI rose 11.3% to S$50.4m. Excluding fair value gains on investment properties of S$2.2m, we estimate that core PATMI rose 14.1% to S$48.2m, forming 99.2% of our earnings projection. A final dividend of 3 S cents was declared, bringing full-year dividends to 4 S cents. This translates into a yield of 1.6% and was higher than FY10’s declared dividends of 3.5 S cents.

Benefiting from robust demand for quality healthcare services

We understand that RMG’s increment in revenue was driven largely by ASP increases, while volume growth contributed to a smaller extent. This improved performance was attributed to growth from its core Hospital Services and Healthcare Services divisions, which saw a double-digit jump in revenue of 14.6% and 10.9%, respectively. The former was driven by higher patient loads and a wider range of medical specialties on offer. Moving forward, we see margin expansion arising from further ASP increases, narrowing losses at its Shanghai medical centre and higher revenue intensity per patient.

Expansion taking place steadily

Management updated us that the 15,000 sf of new medical space to be created at its existing Raffles Hospital would be ready for use in Apr 2012. This would allow the group to accommodate an additional 15-20 new specialists. Commencement of operations at its new Specialist Medical Centre in the Orchard Road area is also expected to take place in 1H13, while we believe that its hospital expansion would be ready in 2014. We finetune our assumptions and introduce our FY13 estimates. Maintain BUY with a higher fair value estimate of S$2.66 (previously S$2.61), still based on 24x FY12F EPS.

RafflesMed – OCBC

EXPANDING FOR THE FUTURE

Results showcase defensive earnings

Final dividend of 3 S cents declared

Forecasting margin expansion in FY12

4Q11 results within expectations.

Raffles Medical Group (RMG) reported its 4Q11 results which were within our expectations. Revenue rose 13.9% YoY and 4.6% QoQ to S$72.3m. Net profit increased 10.3% YoY and 39.9% QoQ to S$16.5m. For FY11, revenue of S$272.8m represented a 14.1% increase, and just 0.5% shy of our forecast. Reported PATMI rose 11.3% to S$50.4m. Excluding fair value gains on investment properties of S$2.2m, we estimate that core PATMI rose 14.1% to S$48.2m, forming 99.2% of our earnings projection. A final dividend of 3 S cents was declared, bringing full-year dividends to 4 S cents. This translates into a yield of 1.6% and was higher than FY10’s declared dividends of 3.5 S cents.

Benefiting from robust demand for quality healthcare services

We understand that RMG’s increment in revenue was driven largely by ASP increases, while volume growth contributed to a smaller extent. This improved performance was attributed to growth from its core Hospital Services and Healthcare Services divisions, which saw a double-digit jump in revenue of 14.6% and 10.9%, respectively. The former was driven by higher patient loads and a wider range of medical specialties on offer. Moving forward, we see margin expansion arising from further ASP increases, narrowing losses at its Shanghai medical centre and higher revenue intensity per patient.

Expansion taking place steadily

Management updated us that the 15,000 sf of new medical space to be created at its existing Raffles Hospital would be ready for use in Apr 2012. This would allow the group to accommodate an additional 15-20 new specialists. Commencement of operations at its new Specialist Medical Centre in the Orchard Road area is also expected to take place in 1H13, while we believe that its hospital expansion would be ready in 2014. We finetune our assumptions and introduce our FY13 estimates. Maintain BUY with a higher fair value estimate of S$2.66 (previously S$2.61), still based on 24x FY12F EPS.

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