Raffles Medical Group

Raffles Medical Group: OCBC upgrades to Buy from Hold with $3.42 TP. House note that the sale of its freehold seven-storey commercial podium which is located near Orchard Road. This is because it has failed to secure regulatory approval for the change of use of the property to a medical centre. The podium is independently valued at $98m (as at end 2012), a 6.4% premium to its purchase price in Apr 2011. Meanwhile, mgt is aiming to improve its operating efficiencies by implementing a new Hospital Information System and Electronics Medical Records System. House believe that value has re-emerged for RMG following its drastic 16.5% share price decline from its recent peak. RMG remains on track to achieve a core EPS CAGR of 12.7% from FY12-14F, while offering FY13F ROE of 14.9%. Rolling forward valuations to 29x blended FY13/14F EPS, derive a higher fair value estimate of $3.42 (previously $3.22).