Raffles Medical Group (RMG): RMG’s new Shanghai hospital project is timely, in seizing the imminent opportunities as the Chinese government increasingly supports investments in this area. Healthcare spending is still low in China, estimated at 5.4% of GDP and private hospitals currently account only 10% of total patient. This implies great potential for RMG, which has excellent track record of execution.
Competitive landscape currently remains clear as there are no foreign competitors in China which operate a private hospital on the same scale as RMG’s upcoming project. Difficult issues of strict government operational guidelines, local partner knowledge and operational experience will present barriers to entry. Furthermore, RMG will be a first-mover in shaping customers’ experience.
RHB reiterates its BUY rating and increase TP to $5.60 as the house believes RMG’s new Shanghai project is still undervalued by the market and this project is highly accretive. Even though this implies a high FY16F PER of 40.5x, this multiple is justifiable by the long-term growth and stable cash relative to its peers.
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