FY13 results were within expectations. It was yet another record year with recurring PATMI rising 14.5% to SGD61m. Reiterate BUY with Street-high DCF-based TP of SGD4.11.

We hosted an investor luncheon with Dr Loo and his team. Interest level was overwhelming. We believe this is largely due to its more “exciting” growth profile with a slew of expansion plans in place.

Key takeaway: Management is optimistic about its growth plans, especially in China, where it hopes to eventually build a bigger business than in Singapore.

Key luncheon takeaways

Both the new Holland Village specialist centre and Raffles Hospital extension are expected to be complete by 2016. In the meantime, there is headroom for organic growth to continue. Management concurs with our view that Singapore’s Budget 2014 is positive for private healthcare players, citing the Community Healthcare Assist Scheme (CHAS) as an example. In China, discussions with its JV partners remain constructive, with the MOUs extended to Jun 2014. Management is excited by the scalability of this business, given the growing affluent population.

What’s Our View

Raffles Medical’s 4Q13 revenue was slightly weaker than expected (+6% YoY), but this is likely to be transitionary as patient visitorship becomes more evenly spread out through the year. We expect growth to be higher from here. While the abrupt and untimely departure of its CFO is a concern, we believe the impact will be mitigated by the company’s improved ability to attract talent, not to mention the strong management team now in place. Raffles Medical remains our top pick for the Singapore healthcare sector. Reiterate BUY with a Street-high DCF-based TP of SGD4.11, implying 32.4x FY14E P/E.  

Source: Maybank Kim Eng Research - 25 Feb 2014