Raffles Medical Grp

Raffles Medical Grp: Positive interests continues to flow into grp/sector, with the upcoming potential IPO of IHH holdings. Recall last wk that DMG had upgraded the counter, on back of defensive and valuation grounds. Maybank Kim Eng becomes the latest to join in the healthcare bandwagon. House note that recent dip in share price has resulted in grp emerging as the cheapest hospital stock in the region. Believe that the defensive nature of its hospital earnings is a strong attribute in an uncertain market. Despite the recent sell-off in equity markets, hospital stocks have managed to hold on to their premium valuations, trading at above-market average P/E of about 26x. Aside from defensive earnings, anticipation of renewed interest in the healthcare sector could have provided stock support, in the hope of a positive re-rating in valuations for the sector. Conclude that Raffles Medical Grp has the strongest balance sheet among its peers, being the only one in a net cash position. Even after accounting for capex for its expansion plans, expect it to remain in a net cash position, helped by its strong operating cash flow generating capability.