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Raffles Medical Group Ltd. - When will Bideford Road specialist centre finally open?

Kiran Rameshchandra

6/4/2013 – Raffles Medical Group has been cut to a HOLD by OCBC Research, partly because the stock has gained strongly, and partly because of reduced estimates.

RMG jumped 18.2% against the STI’s 4.7% gain, since OCBC upgraded the stock to a BUY on October 10.

But OCBC has now lowered its fair value from S$2.82 to S$2.68 as a result of its reduced estimates.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question
Question

1. When will the capacity expansion plans finally take place?

Raffles Medical Group is trying to expand its capacity with a new Specialist Centre at 30 Bideford Road.

But OCBC Research believes there is still uncertainty over when it can open because the authorities rejected its first application last October.

The application for the change of use of the commercial podium for medical clinics has not been successful presumably due to traffic concerns despite earlier discussions with Ministry of Health went smoothly.

Analyst now assumes the delay could stretch until late this year or early next.

It believes there could also be a negative flow-through effect to its Raffles Hospital as this new Specialist Centre was intended to act as an additional platform for referrals for follow-up diagnostic and treatment services.

Question
Question

2. How will it finance the Hong Kong land tender bid?

RMG is currently awaiting the results of its Hong Kong land tender bid for a private hospital development, which was submitted on July 27, with results expected to be announced in early 2013.

Regardless of the outcome of the tender results, OCBC Research opines that there would be no material near-term financial impact on RMG, given that this is a greenfield project and capital expenditure would take place in stages.

It expects this project to be financed by RMG’s operating cashflow and debt.

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

Sources & further information

Sources
Sources


OCBC Research Report


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