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The Good And Bad That Investors Should Know About Raffles Medical Group Ltd’s Latest Results

Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and thirteen cities. Furthermore, it has two hospitals under development in China. The company recently reported its 2018 third quarter (3Q FY18) earnings update. In this article, I will look at the positive and not-so-positive aspects of its update.

The positives

First of all, Raffles Medical achieved higher revenue and net profit for the quarter. The former was up by 1.2% year-on-year to S$121.0 million while the latter grew 2.2% year-on-year to S$16.2 million. Healthcare Services division grew revenue by 8.0% year-on-year due to the addition of new corporate clients and the new contract to provide Air Borders screening services.

Secondly, the company generated strong cash flow from operating activities, amounting to S$31.7 million, up from S$24.5 million last year. The improvement in operating cash flow was driven by higher profitability and better working capital management.

Thirdly, Raffles Medical maintained a strong balance sheet at the end of the quarter. Borrowing stood at S$95.7 million while its cash and cash equivalents stood at S$102.6 million, as of 30 September 2018, giving it a net cash position of S$6.9 million.

Last but not least, the company has a number of projects to grow its business in the near to medium term. In particular, construction of Raffles Hospital Chongqing and Raffles Hospital Shanghai are progressing well. The former is expected to open by the end of this year while the latter is slated to open in the second half of 2019.

The negatives

For the quarter, Hospital Services division saw its revenue decline by 3.8% year-on-year. This was mainly due to refurbishment of current inpatient facilities.

Conclusion

Overall, Raffles Medical delivered a positive performance in the quarter. With its various projects in place, investors might expect the company to continue growing revenue in the future. Yet, margins might be depressed during this period as the new hospitals scale up their operations.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool Singapore has a buy recommendation for Raffles Medical.