With more than a 600% increase in its stock price since its trading debut in 1997, Raffles Medical Group (SGX: BSL) has certainly been one of the star performers of the Singapore stock market.
However, in more recent times, the company has not fared as well. Its revenue and profit growth have both been stagnating, and it seems that the company has nearly reached a saturation point in its family medicine business in Singapore. Consequently, its stock has also gotten some stick from market participants; from a peak of S$1.65 in 2015, Raffles Medical’s stock price has plunged by over 30% to S$1.12 currently.
But, I feel that there are credible reasons to be optimistic about the future of Raffles Medical Group.
New Raffles Specialist Center opened in January 2018
The company finally opened its much-anticipated extension to Raffles Hospital on 22 January this year. The 20-storey specialist center will add additional bed capacity to the company’s current facility, and also provide room for further growth of its specialist services.
With Raffles Hospital contributing more than half of the company’s revenue, and also having a much higher profit margin than the healthcare services segment, the extension of the hospital will not only provide an avenue for revenue growth, but will also likely widen the company’s overall profit margin.
Opening of Raffles Hospital Chongqing and Raffles Hospital Shanghai
Perhaps the most exciting part of the company’s growth is the planned opening of two new hospitals in China in the near future.
The first hospital set to be opened later this year is a 700-bed hospital in Chongqing. Raffles Medical Group is also on track to open a 400-bed hospital in Shanghai in the second half of 2019.
If the success of the company’s flagship Raffles Hospital in Singapore is anything to go by, investors should certainly feel optimistic about the potential revenue growth that the two new China hospitals can bring to the company.
Healthy balance sheet
Despite having invested a hefty amount into the construction and development of the two new hospitals in China in the past two to three years, Raffles Medical has managed to maintain a healthy balance sheet. It has total assets worth S$1 billion, and total liabilities of just S$254 million. It also has a cash balance of S$98 million, with total loans and borrowings of just S$79 million. The company’s strong balance sheet gives it ample room to make further investments if the opportunity arises.
Furthermore, the company, under the guidance of its co-founder and executive chairman, Dr Loo Choon Yong, has a stellar track record of consistently expanding its services and has made prudent use of its capital.
The Foolish bottom line
Despite a somewhat subdued few years in terms of business growth, I believe Raffles Medical Group has managed to sow the seeds for its future. Its two new hospitals in China, plus the extension of its Singapore hospital, will provide a good stepping-stone for the company to expand its geographical footprint and to reward long-term shareholders who have been committed to its growth story.
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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 Jeremy Chia own shares in Raffles Medical Group.