Raffles Medical

Raffles Medical: Raffles Medical's 3Q14 net profit grew 11% y/y to $15.5m, in line with revenue growth to $94.5m, buoyed by healthcare services (+16.4%) and hospital services (+7.3%). In the healthcare services segment, the group saw higher patient load, an expanding clinic network and increased provision of healthcare insurance services, while the hospital services division saw the addition of new specialist consultants and higher in-patient admissions. This brought 9M14 earnings to $45.6m (+9.2%) and revenue to $274.6m (+8.6%), 64% and 73% of street's FY14 estimates. Market watchers are expecting Raffles Medical's fourth quarter to be its strongest, due to seasonal effects. Historically, 4Q contributes 30% to full-year earnings, backed by higher patient load and some tax relief. Group's net cash position remained healthy at $118.9m ($0.21/share), although it dropped from $130.6m in 2Q14, due to capex spending ($10.4m) and interim dividend payment ($8.5m). Group continues to target future growth organically through the expansion of specialist centres, as well as to progressively build up breadth and depth of its capabilities. The upcoming RafflesHospital extension, located at the site adjacent to RafflesHospital, is targeted for groundbreaking at year end and will add an additional 220,000 sf to its current 300,000 sf gfa in two years. Meanwhile, construction work for Raffles Holland Village is underway, which will add another 9,000 sf of medical and specialist services for the group. Management expects the healthcare landscape to remain competitive with new public and private hospitals, being developed in Singapore and the region, in addition to the shortage of healthcare manpower in Singapore. The stock trades at a forward P/E of 30.7x, compare to regional peers' average of 33.1x. Latest broker ratings: Maybank-KE maintains Hold with $3.93 TP OCBC maintains Hold rating with $3.90 TP under review