Raised  charges,  but  still  lower  than  its  local  competition.  About  50%  of  its  revenue growth  was  attributed  to  price  increases.  Despite  the  increase  in  charges,  management maintains  that  it  is  still  lower  than  what  other  private  healthcare  providers  charge.  This indicates that there is more room for rates increase (a gradual increase to be expected in FY13), which would help give revenue growth a boost.

Overseas expansion plans moves forward a little. After considering opportunities in the China market for the past few years, Raffles Medical finally took some action and signed a non-binding Letter of Intent (LOI) with a Chinese partner  (a member of China Merchants Group), to collaborate on the proposed development of an integrated international hospital in  Shenzhen,  China.  The  terms  of  this hospital project  is  still  being  finalised.  Should  both parties  come  to  an  agreement,  the  hospital  would  likely  commence  operations  in  three years' time. Funding for this potential investment could be in the form of debt and cash. We think Raffles Medical's strong balance sheet would enable it to do so.

Staff  costs  expected  to  rise.  As  Raffles  Medical  continues  to  gradually  expand  its specialist  services,  it  is  likely  to  continue  hiring.  Coupled  with  higher  wages,  this  would raise its staff costs. Management remains committed to keeping staff costs to under 50% of Group revenue.

Raise  TP,  maintain  NEUTRAL. We  are  expecting  PATMI  of  SGD62.2m  (+9.3%  YoY)  in FY13,  while  margins  are  relatively  stable.  We  have  lowered  our  WACC  assumption slightly, as the outlook is better, with demand from medical tourists still healthy.

Source: OSK