Raffles Medical Group Ltd (SGX: BSL) is the largest private healthcare group in Singapore. Established in 1976, it now operates beyond our shores in 12 cities across China, Japan, Vietnam and Cambodia. Of late, Raffles Medical’s shares have not been doing well. Its shares closed at S$1.10 on 24 December 2018, down 34% from a high of S$1.675 in May 2016. The poor showing can be attributed to a slowdown in Raffles Medical’s business. The company’s earnings per share (EPS) from 2014 to 2017 has stayed at around 4.0 Singapore cents throughout. Before that, its EPS climbed from 2.41 cents…
Raffles Medical Group Ltd (SGX: BSL) is the largest private healthcare group in Singapore. Established in 1976, it now operates beyond our shores in 12 cities across China, Japan, Vietnam and Cambodia.
Of late, Raffles Medical’s shares have not been doing well. Its shares closed at S$1.10 on 24 December 2018, down 34% from a high of S$1.675 in May 2016. The poor showing can be attributed to a slowdown in Raffles Medical’s business. The company’s earnings per share (EPS) from 2014 to 2017 has stayed at around 4.0 Singapore cents throughout. Before that, its EPS climbed from 2.41 cents in 2007 to 5.08 cents in 2013, growing at 13.2% annually.
However, over the long-term, there are many two major reasons to be optimistic about the company.
Expansion of the flagship hospital in Singapore
In Singapore, Raffles Hospital at the Bugis area has been extended for growth. The extension, called Raffles Specialist Centre, opened in January 2018 and will pave the way for Raffles Medical to further increase its breadth and depth of clinical services. In its fiscal 2017 earnings update released in February this year, the medical group explained:
“Various specialist centres and the radiology centre have been relocated to the new building from the existing hospital. With the new Raffles Specialist Centre in operation, works have begun on Raffles Hospital to open up new wards to increase bed capacity, as well as to refurbish the podium for new food and beverage and related shops. Upon completion of these works by middle of the year, the two buildings Raffles Specialist Centre and Raffles Hospital will provide ambulatory and inpatient capacity to support the expansion of specialist services to serve the growing needs of our local and foreign patients.”
The capacity expansion bodes well for the long-term growth of Raffles Medical. An ageing population and the increasing affluence in Singapore should help ensure there is sustained demand for its services.
Expansion in China with two hospitals
Apart from growing in Singapore, Raffles Medical is also widening its reach in China. Currently, the medical outfit is building a 400-bed international general hospital in Shanghai and a 700-bed international tertiary general hospital in Chongqing.
The hospital in Chongqing is slated to open by the end of this year while that in Shanghai is expected to operate in the second half of 2019.
In its 2018 third-quarter earnings update released two months ago, Raffles Medical gave updates on the progress of the two hospitals:
“Construction of Raffles Hospital Chongqing and procurement of equipment are progressing according to schedule. The Hospital Management team has been in Chongqing preparing for the opening of the hospital. A team of international and local physicians from various specialties has been recruited for the Hospital. Raffles Hospital Chongqing shall, subject to obtaining all the requisite regulatory approvals, be opened by the end of the year.
Construction of Raffles Hospital Shanghai, in Pudong, is progressing well. It is slated to open in the second half of 2019.”
Granted it could take some time for the hospitals to ramp up and contribute to the bottom-line, but if investors are patient with the company and focus on the long-term, they could be rewarded well.
At Raffles Medical’s share price of S$1.10, it is selling at a price-to-earnings ratio of 28 and a dividend yield of 2%.
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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 Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Raffles Medical Group Ltd.