Raffles Medical Group Ltd’s Latest Earnings: What Investors Should Know

Raffles Medical Group Ltd  (SGX: R01) reported its fiscal fourth-quarter earnings this morning. The reporting period was for 1 October 2014 to 31 December 2014.

The healthcare services provider has two major divisions, namely, the Healthcare Division, and the Hospital Services Division. The company’s medical clinics, health insurance, and consultancy services fall under the former. Meanwhile Raffles Medical Group’s specialist medical services and namesake hospital is housed under the latter.

You can catch Raffles Medical Group’s previous earnings report here and read more about the firm here.

Financial highlights

Here’s a rundown on the latest financial figures for the company:

  1. Overall revenue for the fourth quarter rose by about 13.4% year-on-year to $100 million. Raffles Medical Group finished 2014 with $374.6 million in revenue, almost 10% above 2013’s revenue of $341 million.
  2. Net profit for the fourth quarter dropped by 49% from a year ago to $22 million. For the whole of 2014, profit attributable to shareholders came in at $68 million, down 20.3% from a year ago. The profit decrease was mainly due to a tough comparable with the last quarter of 2013, which included a one-time gain from the disposal of a subsidiary.
  3. For the same reason given in the second point, the company’s earnings per share (EPS) also fell 50% from 7.73 cents in the fourth quarter of 2013 to 3.87 cents in the reporting quarter. Raffles Medical Group’s 2014 EPS was 11.96 cents – this represents a 21.5% decline from 2013’s EPS of 15.24.
  4. For 2014, Raffles Medical Group’s cash flow from operations came in at $93.5 million with capital expenditures clocking in at $17.7 million. The low capex gave the healthcare provider a healthy $75.8 million in positive free cash flow, up from the figure of $63 million seen in 2013.
  5. As of 31 December 2014, the company had $150.2 million in cash and equivalents and just under $6.4 million in debt. This is a net decrease from the $265.9 million in cash and equivalents seen exactly a year ago.

In short, Raffle Medical Group’s revenue has continued to chug along – not unlike the previous three quarters this year. Aside from the tough comparable with last year’s profit, the healthcare provider boasts a healthy balance sheet and also generated copious amounts of free cash flow.

A final dividend of 4 cents per share was recommended by Raffles Medical Group in the quarter, bringing the total dividend for 2014 to 5.5 cents. That’s a 10% increase over the total dividend of 5 cents per share for 2013.

Operational highlights

For the full year, revenue from the Healthcare and Hospital Services segments grew 12.5% and 8.4% respectively. The Hospital Services segment brought in $250.8 million in revenue for 2014 while the Healthcare segment pulled in $140 million. Raffles Medical Group attributed its top-line growth to a higher patient load from its expanding clinic network and the addition of more specialist consultants.

On the profit side, the company’s 2013 result was inflated from a $20.4 million one-time gain from the disposal of a subsidiary. Excluding the one-time gain, Raffles Medical Group’s profit before tax for 2014 would have grown 10.3% compared to 2013.

The decline in the company’s cash position in its balance sheet was attributed to spending for the investment properties under development (around $189 million) and the distribution of cash dividends worth $12.6 million during the year.

Foolish investors may remember that Raffles Medical group is in the midst of expanding its flagship hospital – Raffles Hospital – and developing a new facility at Holland Village. The Raffles Hospital Extension commenced construction last December, and is expected to be completed in the first quarter of 2017. Meanwhile, the Raffles Holland Village construction is in progress and is expected to be completed in the first quarter of 2016.

Furthermore, the company also expects to benefit from the Community Health Assist Scheme (CHAS) and the Pioneer Generation (PG) package initiated by the Singapore government.

In all, Raffles Medical Group’s management team had the following commentary to add for the rest of 2015:

“Competition in the healthcare sector is likely to remain keen with new hospitals being developed in Singapore and the region. The more measured pace of economic growth in China and Singapore may have a dampening effect on healthcare demand. However, the ageing population in Singapore and the region will continue to generate demand for reliable curative healthcare services. The Group is well-placed to capture growth for the future with the Raffles Hospital Extension and Raffles Holland Village projects. The Group will continue to be vigilant and to proactively respond to new opportunities that may arise.

Based on current economic outlook and barring unforeseen circumstances, the Directors are optimistic that the Group will continue to grow for the year 2015.”

Foolish take away

At its opening price of $4.10 today, Raffles Medical traded at around 34 times its latest trailing earnings and has a dividend yield of 1.3%.

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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 doesn’t own shares in any companies mentioned.