• Gradual progress for HV mall
• Long term growth intact
• Rating unchanged for now

Gradual progress for HV mall

Recall that the Raffles Medical Group’s Holland Village Mall project constitutes a floor area of 62.7k sq ft, with 9k sq ft housing its healthcare and medical services. A Straits Times article dated 15 Jun reported that a recent visit to the mall showed a ‘deserted mall’, with RMG’s centre and a few other tenants just starting preparations.

We acknowledge that the overall process has been taking longer than guided but our assumptions for HV mall only accounts for about 1-2% of FY16F/17F revenue estimate, thus we would not be overly concerned over the status of HV mall during its gestation period.

Local healthcare sector to transform through innovation

The Ministry of Health’s 2015 Patient Satisfaction Survey (PSS) revealed that 85.9% of respondents were on an overall basis satisfied with public healthcare institutions. Respondents had placed high importance on waiting time as a factor, which continued to be a key area for improvement.

Nonetheless, we note that the local institutions continue to develop through various initiatives towards improving efficiency and sustainability. Innovation has been a big theme for the broader economy, and Deputy Prime Minister Tharman Shanmugaratnam had also cited the healthcare sector potentially leveraging on augmented intelligence to deliver better quality and personalized healthcare.

As standards at public healthcare institutions continue to improve, this could translate to competition for local patients between the public and private players in the longer term. But we keep in mind that the private sector is also supported by foreign patients demand, and RMG for instance is extending its presence overseas.

Maintain HOLD

Recall that we downgraded the stock from a Buy post-1Q16 results due to the limited upside. The share price of Raffles Medical Group had recently turned south to some extent. We are maintaining our HOLD rating with our fair value estimate at S$1.57 unchanged.

We still like the group’s long term plans of expanding capacity as well as geographical presence, and believe that the group is still a strong contender in the region. Hence, longer term investors can consider accumulating at S$1.45 or lower.

Source: OCBC Research - 23 Jun 2016