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Stocks to Watch: Singapore Airlines Ltd and Raffles Medical Group Ltd

Earnings season is upon us again. Singapore Airlines Ltd (SGX: C6L) and Raffles Medical Group Ltd (SGX: BSL) are two companies that will be releasing their results this week. Here’s what to look out for.

First steps in China…

Raffles Medical Group opened its first hospital in China — Raffles Hospital Chongqing — earlier this year. In the first quarter of 2019, the group’s revenue grew 6.7% but profit attributable to owners declined 13.7%.

The loss was expected due to gestational loss of the new China hospital. Executive chairman, Dr Loo remained optimistic about the group’s expansion into China, saying,

“The opening of RafflesHospital Chongqing marks the beginning of a bold new venture into the Chinese healthcare market of 1.4 billion people, and it will provide the Group with unlimited opportunities to expand its services.”

Besides Raffles Hospital Chongqing, another hospital in Shanghai is currently under construction and is expected to open in 2020. Preparatory works for commissioning and operational phase has already begun in Singapore.

The group, which also operates Raffles Hospital in Singapore, has taken up loans to fund its investments. However, its core business is still generating a healthy cash flow. In the first quarter of 2019, cash flow from operations was S$21.7 million, compared to its net debt position of S$14.2 million. The cash generated will provide the group with the financial muscle needed during its first steps into China.

Raffles Medical Group released its second-quarter results earlier today. Investors should look out for updates on losses incurred in China and whether the construction and opening of Shanghai Hospital are within schedule. Raffles Specialist Centre in Singapore was also officially opened on 12 March 2019. This should provide another revenue stream to the group.

Climbing new heights

Singapore Airlines was in the spotlight earlier this year when it issued bonds to raise funds to increase its fleet. The group has now spent over S$11 billion over the last two years on aircraft, spares and engines as it embarks on a major expansion phase.

This is part of a three-year transformation program, whereby Singapore’s flagship carrier is working to pivot to keep relevant in the highly competitive airline industry. One of its business initiatives is to upgrade Silkair’s fleet to eventually merge it with Singapore Airlines. The group is also pushing to transform Singapore Airlines into one of the world’s leading digital airlines.

However, investors need to keep an eye on the group’s financial position. The parent company of Scoot is now in a net debt position of more than S$3 billion, from a net debt position of under S$1 billion at the start of FY2018. While the group continues to generate healthy operating cash flows, its high net debt position has weakened its financial standing.

Investors will also need to keep an eye on the fuel prices, which can materially impact the group’s operating costs. Singapore Airlines will be releasing its results on Wednesday, 31 July 2019.

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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 recommends shares of Raffles Medical Group Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares of Raffles Medical Group Ltd.