Summary: Raffles Medical Group (RMG) announced this morning that it has agreed to acquire a land site adjacent to its Raffles Hospital from the Singapore Land Authority for S$105.2m. Given its plot ratio of 5.6 times, this would yield a GFA of 11,077.36m2. Coupled with prior provisional approval from URA to extend its existing Raffles Hospital premises, this would increase RMG’s total GFA by 72% to 49,217.28m2 upon completion. Both this land and its existing hospital site have a 99-year leasehold (commenced on 1 Mar 1979). We are positive on this move given our robust view on Singapore’s healthcare market potential in the long term and also RMG’s strong track record as a medical services provider to both local and foreign patients. The estimated development cost of these projects (including land purchase and construction costs) amounts to S$310.0m and will be financed by internal resources and bank borrowings. As at 30 Sep 2013, RMG was in a healthy net cash position of S$141.7m. It also received gross proceeds of S$120m in 4Q13 from the sale of its Thong Sia commercial podium, which would be used to finance the purchase of a property in Holland Village. Maintain BUY and S$3.61 fair value estimate on RMG.

Source: OCBC Research - 22 Jan 2014