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7 Highlights from Raffles Medical Group Ltd’s Q1 2019 Earnings

Earlier this morning, Raffles Medical Group Ltd (SGX: BSL), or RMG for short, released its first quarter fiscal year 2019 (Q1 2019) earnings report. As a quick recap, RMG runs hospital and healthcare services in both Singapore and China, and has a network of clinics in both Singapore and four other Asian countries. In China, it has completed the construction of one hospital while another is under development.

Here are seven highlights from RMG’s latest earnings report:

  1. Revenue for Q1 2019 rose by 6.7% year-on-year to S$128.3 million from S$120.2 million a year ago. Revenue from healthcare services and hospital services divisions grew by 8.9% and 3.2%, respectively. For healthcare services, higher revenue was recorded due to an increase in premium from existing and new clients as well as the Primary Care Network (PCN) scheme and other projects. Hospital services saw better revenue contribution due to higher utilisation of hospital facilities.
  2. Due to higher start-up costs for Raffles Hospital Chongqing (RCQ), operating profit for RMG declined by 9.4% year-on-year to S$17.1 million. As a result, net profit after tax declined by 13.7% year-on-year to S$13.6 million. If the results of RCQ are excluded from the group, net profit after tax would have grown by 2.1% year-on-year. The company said that the gestation loss for RCQ is within expectation.
  3. RMG’s balance sheet remains strong with S$111.8 million of cash and S$126 million of debt. The group continues to generate healthy operating cash flows of S$21.7 million, while capital expenditure was elevated during the quarter at S$26.4 million due to the construction of Raffles Hospital Pudong in Shanghai, China.
  4. Raffles Hospital Singapore officially opened its new block Raffles Specialist Centre in March 2019. The complex is equipped with ambulatory and inpatient services from 31 different specialties, and would enable the group to provide quality care and services to customers.
  5. Another eight clinics were added to Raffles Medical clinics’ PCN of 40 clinics to enhance convenience to more patients and to branch out to more areas in Singapore for easier access to patients.
  6. The directors expect RMG to be able to grow its revenue and remain profitable for 2019, notwithstanding the expected gestation loss for RCQ.
  7. RMG’s trailing 12-months earnings per share stands at 3.84 Singapore cents. Based on the closing price for RMG of S$1.07 as of 26 April 2019, the group is trading at a trailing 12-months price earnings ratio of 27.9x. With a full-year trailing dividend of 2.5 Singapore cents, historical dividend yield stands at 2.3%.

All seems to be in order to at RMG, as the expected gestation loss for RCQ is within expectations. The group continues to demonstrate resilience in its core operations, with both divisions showing growth. With the opening of Raffles Specialist Centre and the addition of clinics to the PCN, both divisions should continue to witness healthy growth.

Raffles Health Connect’s platform, which was launched just three months ago in January 2019, should continue to see slow and steady uptake. Investors should maintain a long-term view with regards to RMG’s China expansion as it is still early days for the group, as it is anticipated that each hospital would need at least three to four years to break even.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has a recommendation for Raffles Medical Group Ltd. The Motley Fool Singapore contributor Royston Yang owns shares in Raffles Medical Group Ltd.