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MBKE: Raffles Medical Expansions In SG & China; 16% Upside!
Aspire, Hot Picks | 10 July 2015
By: Raymond Leung
Articles (142) Profile

Source: Business Times SG

Raffles Medical Group (RFMD) had multiple developments in both Singapore and China recently. Maybank Kim Eng (MBKE) thinks that these initiatives would make a more meaningful 2H for RMFD.

Initiatives on local grounds include an expansion of Raffles Hospital, a new medical centre in Orchard and a collaboration to treat subsidised patients. While in China, a new Shanghai Hospital is expected to complete in 2018.

Furthermore, the threat of MERS might be beneficial for RFMD’s outlook in the near and mid-term. As such, MBKE analysts give RFMD a “Buy” call.

Local Expansions

The new floor in Raffles Hospital will add 30,000 square feet of space to the hospital, while the new medical centre in Shaw Centre will add 17,000 square foot and Orchard Road to its portfolio.

To solve the tight supply of hospital beds in Singapore, the government has collaborated with RFMD for patients sent in by the Singapore Civil Defense Forces (SCDF) under subsidised rates.

RFMD will be opening its medical centre in Holland Village by 1Q16. This new medical centre will expand the group’s presence in Singapore while the completion of the 222,000 square feet expansion will be completed in 1Q17.

Developments In China

In China, the management of RFMD will be continuing with its expansion plans for the country. They will be continuing with their pursuit to acquire a hospital in Shenzhen which was announced in February 2013.

Progress was made for the 400-bed hospital in Shanghai as it plans for an opening in 2Q18. This plan was first announced in September 2013 and the joint venture formed in May 2015.

Increasing Competitive Advantage

Despite competition from new private and public hospitals, RFMD is able to distinguish itself from its competitors with its group practice. Local expansions have helped the group grow its presence and brand.

RFMD’s China expansion plan will allow the group to access a new market with sizable clientele.

With these developments, analysts from Maybank Kim Eng reiterated their “Buy” call towards RFMD. They are bullish towards the counter and believe that it has a potential upside of 16.1 percent, with a target price of $5.40.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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