• Strategic partnership
• Benefits in both China and Singapore
• Maintain FV of S$1.26

MOU With CTIG

Last month, RMG announced that the group has signed a Memorandum of Understanding with China Taiping Insurance Group (CTIG) to jointly provide medical/ healthcare insurance solutions as well as healthcare management services and explore health-related real estate opportunities. As we understand, apart from working capital, RMG would not be required to put up any significant capex, given that the initial costs would likely be confined to the joint marketing of products.

In our view, this collaboration is a strategic and logical move for RMG, given the group’s existing clinics in China, as well as the upcoming opening of Raffles Hospital Chongqing and Raffles Hospital Shanghai in 4Q18 and 2H19, respectively. Also, the benefits to RMG should be seen back home as well. CTIG has overseas businesses in the UK, Indonesia and Singapore, which are very much in-line with the Chinese government’s Belt and Road initiative, and the group is looking at ways to proactively provide risk protection and services for Chinese businesses overseas.

To that end, this newlyminted relationship with RMG could help drive both individual and corporate loads to the latter’s network of island-wide clinics as well as to Raffles Hospital.

NDR Takeaways

Separately, recall also that at the last National Day Rally speech, Prime Minister Lee Hsien Loong touched on a number of key points pertaining to healthcare in Singapore. These include (a) an expanded Community Health Assist Scheme (CHAS) to cover all Singaporeans with chronic conditions, (b) a Merdeka Generation Package for those born between 1950-1959, and (c) 6 more polyclinics by 2023.

Interestingly, RMG’s share price fell 4.7% the next day, despite the general policy direction at making healthcare more affordable for more segments of society. In our opinion, (c) might have been of some concern, given the possibility of it providing more competition to RMG's clinics.

However, this move is no surprise, given that a similar announcement was already made in the March 2018 Committee of Supply debate. As such, we think the new supply of healthcare provision has and should already been well internalized by the market. We maintain our FV estimate of S$1.26 for now.

Source: OCBC Research - 24 Sept 2018