3 Things Investors Should Know From Raffles Medical Group Ltd’s Latest 2016 Results

Raffles Medical Group Ltd (SGX: BSL) is a healthcare services provider.

It runs a hospital in Singapore, is currently developing a hospital in China (with an expected completion date of 2018), and has a network of medical centres and facilities in 13 cities across five countries (Singapore, China, Japan, Vietnam, and Cambodia).

The company recently reported its 2016 full year results. Let’s look at three useful pieces of information from the results announcement:

1. The overall numbers

The following table shows some important items from Raffles Medical’s income statement from 2016 and 2015:

Raffles Medical Group income state
Source: Raffles Medical 2016 full year results announcement

The table above show that the healthcare company has delivered mostly growth.

2. The positives

There are a few positives about Raffles Medical latest’s result.

Firstly, the company managed to achieve strong double digit growth in revenue in 2016. The company’s two divisions contributed with higher revenue – the Healthcare services division turned in a 30.8% increase in revenue while the Hospital services division grew its top-line by 6.3%.

Secondly, the company expects more growth to come in 2017. This is not unexpected, given that the company can count on higher contribution from projects such as Raffles Holland V (a medical/retail centre that officially opened in October 2016), new clinics in Hillion Mall and Changi Airport Terminal 4, and clinics in Bukit Batok Central, Waterway Point and Fragrance Empire Building that were newly opened in 2016.

In sum, the growth story for the company remains intact.

3. The negatives

Despite the growth prospects, investors may also want to keep an eye on the escalation of operating costs at Raffles Medical.

Although the company’s revenue grew in the mid-teens rate in 2016, its costs increased at an even faster pace, resulting in lower operating profit growth as compared to revenue. The increase in costs is driven partly by higher staff costs (for expansion and from acquisitions) and higher operating leases.

Given the ongoing expansion of the company (Raffles Medical is also currently developing an extension wing to its current flagship, Raffles Hospital, with an expected completion by the second half of 2017), which requires significant investment – on things such as building leases, hiring of medical professionals, and more – it is understandable that growth in operating costs is outrunning that of revenue.

But, investors will need to pay close attention to the company’s cost controls and observe if its costs would moderate as the newer projects mature.

In all, Raffles Medical’s growth story is intact. But, investors may want to keep an eye on the company’s management of costs going forward.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.