6 Useful Things Investors Should Know About Raffles Medical Group

Raffles Medical Group Ltd. (SGX: R01) presented at the SGX: Sector Connect seminar for the Healthcare industry on 27 November 2014. The healthcare service provider has two major divisions: Healthcare; and Hospital Services. The company’s medical clinics, health insurance, and consultancy services fall under the former. Raffles Medical’s specialist medical services and its namesake hospital is housed under the Hospital Services Division. You can read more about the group here.

Here are six useful things I learned from the presentation:

1. Raffles Medical filed for its Initial Public Offering on April 1997 to raise funds to build its flagship hospital at Bugis. It was inspired to organize itself as a Group Practice Model by medical centres such as the Mayo Clinic and the Memorial Sloan Kettering Cancer Center. The snippet below from its 2000 Annual Report describes the group practice model:

Our group practice model is based on staff and visiting doctors working as a team to ensure our patients receive the most appropriate treatment and care. Backed by supporting healthcare professionals and administrators, our doctors are left to concentrate on what they do best – practise medicine.

The power of the group practice is that it harnesses the different strengths of a team of specialists. For patients, this means they can be attended by a team of specialists most skilled to manage their conditions.

2. Raffles Medical has one of the largest network of clinics in Singapore. With this sizeable network, it has been able to sign up corporate clients which include Singapore Airlines Ltd. (SGX: C6L), M1 Ltd (SGX: B2F), DBS Group Holdings Ltd (SGX: D05), Google (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Visa (NYSE:V) among others. Its business is based on a “hub-and spoke” model where the network of clinics would feed patients to its specialist services or flagship hospital.

3. As I shared in a previous article, Raffles Medical has two major confirmed-projects in the horizon. The first one would be the expansion of its flagship hospital in an adjacent plot of land. The project would expand the gross floor area of Raffles Hospital by about 72%. Speaking of concerns over labor shortages, Senior Executive of Investor Relations, Andrew Aw, mentioned that Raffles Medical would typically over-hire to ensure that the company would not suffer from any labor shortages. Due to the sizable expansion in the horizon, the healthcare provider will be gradually ramping up the hiring of its staff in tandem with the expected completion date in 2016.

4. The second major property development would be the new Holland Village facility. Once completed, Raffles Medical will start by using only 9,000 square feet of the projected 65,000 square feet available. The location was chosen to place its services closer to potential customers around the area, and Raffles Medical is using less space (9,000 out of 65,000) to test this initiative. If the company is successful, it may expand its medical services to take up more of the 65,000 square feet of space. Other tenants in the Holland Village facility would provide banking services, food & beverage, and retail activities.

5. Raffles Medical is taking a thoughtful approach in expanding into foreign countries, like China. Among its considerations of setting up operations would be the demographics of the population, the regulatory framework of the country, and the company’s ability to hire and retain staff.

6. Roughly one third of the company’s patients are foreigners. When questioned about the strengthening Singapore dollar affecting health tourism in Singapore, Raffles Medical conceded that there was some reduction from Indonesian clients, but the company still maintained a diversified client base of more than 100 countries.

Foolish takeaway

To buy and hold a company’s shares for the long term also means keeping up with developments in the company. The access to management teams via presentations gives the Foolish investor a fair chance to judge for themselves on whether they would like to be invested alongside the management teams that they have chosen. It also helps us put together a more complete thesis around the company and keep up with developments in its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Google and Apple.