Raffles Medical

Raffles Medical: has announced the acquisition of a land site adjacent to its flagship Raffles Hospital, for $105.2m. The site will have a GFA of ~119,000 sf, which implies a reasonable price of $888 psf, compared to the $1,600 psf that Parkway Holdings (now IHH) paid for its Novena Hospital site. Together with the provision permission previously obtained to increase the plot ratio on the existing Raffles Hospital land, this would increase combined GFA by 72% to ~527,000 sf. The improvement works will cost ~$205m, and are expected to be complete within 24 months. The additional space will be used for expansion of inpatient and outpatient facilities as well as training of staff. With an estimated net cash position of $260m, Maybank-KE believes the company can fund both the Holland V ($120m) and this project ($310m) with debt and internal cashflow. With the project estimated to reap a steady state ROE of 12-15%, Maybank-KE views the expansion positively, for the economies of scale and growth it provides. Maintain Buy with TP $3.80