Within expectations. FY12 results were within expectations as recurring net profit grew 10% yoy. This steady growth was achieved organically and amidst staff cost pressure during the year. After years of organic growth, over the next five years, we expect the Group to pursue more aggressive regional opportunities.

Growth achieved organically. FY12 revenue grew 14%, with hospital services growing 16% and healthcare services (mainly clinics) up 11%. Recurring profit excluding fair value gain of investment properties grew 10% yoy. Staff cost pressure, which was a feature in the three quarters, subsided in the 4th quarter as revenue caught up. Final dividend of SGD3.5 cents per share was announced, bringing full year to SGD4.5 cents (FY11 SGD4 cents).

LOI to develop an international hospital in Shekou, Shenzhen. The company signed a Letter of Intent with China Merchants Group to collaborate on the development of such a hospital which is envisioned to provide high-end private medical services in the region. While nonbinding in nature, we understand from management that both parties are very serious about this project. Total project cost is likely to be in the region of SGD150m, though actual equity will be smaller and construction will likely take 2.5-3 years upon agreement. Pursuing projects on various fronts. Other than the Shekou project, management also has a tender pending for a private hospital project in Hong Kong, which may have synergies with its possible Shekou hospital. Management has submitted a 2nd proposal in the beginning of this year to convert Thong Sia Building and remains open to the option of buying another similar site should it be rejected again. Its flagship Raffles Hospital is also due to begin construction for expansion which will increase capacity by 30%.

Big plans, defensive earnings, but rich valuations. With aggressive growth plans, as well as a track record of solid steady earnings growth, we think RMG deserves to trade at a valuation closer to regional peers. We upgrade our TP to SGD3.45 but maintain our HOLD valuation, given the limited upside of 7% from here.

Source: Maybank Kim Eng Research - 26 Feb 2013