Raffles Medical Group

Raffles Medical Group: CIMB note that patient numbers at RFMD’s clinics have shot up as SG suffers its worst haze in living memory. This could be a catalyst for its shares, especially given the recent pull-back. Dividend upsizing is another catalyst as the group contemplates the sale of its Bideford Rd property. House keep estimates and target price (25x CY14 P/E, on par with regional peers) unchanged. RFMD has a very good cash-churning business. Maintain Outperform call for its focus on high-quality curative healthcare services and organic growth angles. Add that walk-about to two clinics and quick chats with staff suggest that volume for outpatient treatment had risen by nearly 50% wow. However, the still-unknown adverse effects of the haze (the hazardous air quality levels are unprecedented for Singapore) could lead to patients needing hospital stays and other forms of medical attention that could add to RFMD’s bottom line. The price pullback of late has created a valuation gap between RFMD (at 20x CY14 P/E) and its ASEAN peers (at 24x CY14 P/E), which house see no reason not to narrow. Short-term catalysts include a spike in volume for respiratory treatments as recently seen at most of its clinics. Short- to mid- term catalysts include the resumption of operating efficiencies and dividend upsizing. Mid- to long-term catalysts are favourable healthcare consumption themes, the Raffles Hospital expansion and a successful JV with China Merchant Bank to develop an integrated international hospital in Shekou, Shenzhen.