At first glance,Raffles Medical Group Ltd (SGX: BSL) seems to have a pretty dull third quarter of 2018. Revenue only inched up 1.2% from a year ago and profit after tax was just 2.2% higher. On closer inspection, though, there are actually some good reasons to be optimistic about the company’s future.
Positive updates on the opening of China hospitals
Raffles Medical’s much-anticipated opening of two hospitals in China is on track. Raffles Hospital Chongqing is on track to open by the end of the year with procurement and construction progressing according to schedule. In addition, a team of both international and local physicians have already been recruited in anticipation of its opening.
The construction of Raffles Hospital Shanghai is also progressing well, according to management. Management expects the hospital to be opened in the second half of 2019.
These are indeed exciting times for the group, with its first two international hospitals under construction. Of course, international ventures do not always pan out well but with China’s growing middle-class population and high demand for private healthcare, now is the perfect time for Raffles Medical to make its hospital debut in China.
Short-term issues hampering results
Secondly, the tepid growth in revenue was also partially due to refurbishment works in its flagship Raffles Hospital in Singapore. The group is refurbishing its inpatient facilities, which was one of the reasons for the 3% decline in revenue from its hospital services segment.
Once the renovation works are done, it will add more inpatient facilities to the hospital, which will hopefully support the company’s growth in the coming years.
Optimism from management
Finally, it always heartening for shareholders when the management team is confident about the company’s business prospects.
Dr Loo Choon Yong has overseen the group from just a few clinics to one of the most well-established healthcare groups in the region. He said in the latest earnings’ press release:
“Raffles Medical Group will continue to grow both locally and regionally. We are deepening and widening our service offering to meet the needs of our patients and clients. The imminent opening of Raffles Hospital Chongqing marks the beginning of a timely move to serve the growing demand for high-quality healthcare in China.”
The Foolish bottom line
At first glance, Raffles Medical’s quarterly results doesn’t look cheery. But on closer inspection, the timely progress of the construction of its China hospitals and expansion of its hospital in Singapore bodes well for the group’s future. Shareholders who are willing to see out the initial teething phase of its China hospitals will most likely reap the rewards in the future.
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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 Jeremy Chia owns shares in Raffles Medical. Motley Fool Singapore has a buy recommendation for Raffles Medical.