MENU

Is Raffles Medical Becoming Unwell?

800px-RH_Building_001 Raffles Medical Group Limited (SGX: R01) is a private medical organisation with a large network of clinics, hospitals, and surgical centres. At a PE of 31.5, it is currently one of the most expensive private medical service provider listed in Singapore Exchange. The only other company with a higher PE is IHH Healthcare Berhad (SGX: Q0F).

Setbacks

On 10th June 2013, Raffles Medical announced that it had appointed Jones Lang LaSalle Property Consultants Pte Ltd to advise and manage the sale of the commercial property at 30 Bideford Road. Raffles Medical bought the property in 2011 for S$92 million to expand its business. However, the local authorities rejected Raffles Medical’s application to change the use of the commercial podium to a specialist medical practice, twice. This prompted Raffles Medical to look into offloading the property.

Going further back, on 13th March 2013, it was not successful in a tender for a development of a private hospital in Hong Kong.

So, amid these setbacks, is there growth left for Raffles Medical to justify paying 32 times its earnings?

Squeezing some juice out

There might be growth for Raffles Medical in China. It signed a letter of intent with China Merchants Group on 22nd February 2013 to “collaborate on the proposed development of an integrated international hospital with more than 200 beds in Shekou, Shenzhen, the People’s Republic of China. The proposed hospital development is expected to provide high-end medical services in the Pearl River Delta region to foreigners and local residents”.

Also, a steady increase in medical tourism in Singapore may ignite Raffles Medical’s growth path once again. The number of foreign patients seeking medical treatment is on the uptrend again after declining in 2009. In 2012, Raffles Medical saw a 26% increase in the number of foreign patients, with Indonesians making up the majority.

Furthermore, after the unsuccessful tender announcement on 13th March 2013, Raffles Medical went on to say that it may “pursue healthcare opportunities in Hong Kong to meet the growing needs of the community for good quality family medicine, specialist and hospital services.” Any successful foray into Hong Kong may bode well for Raffles Medical.

Foolish Takeaway

If the company’s plans in China do not take off, it will likely affect the future growth of the company negatively. On the other hand, if the company’s growth plans in China and Singapore materialise, then the future for Raffles Medical can be bright.

Click here now  for your   FREE   subscription to   Take Stock  Singapore, The Motley Fool’s free investing newsletter. Written by   David Kuo ,   Take Stock Singapore   tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.  

Like us on Facebook   to keep up-to-date with our latest news and articles. The Motley Fool’s purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.