Raffles Medical Group : Is This Renowned Hospital Brand A Good Buy?


  • Growing demand for medical tourism
  • Growing demand for preventive healthcare
  • Expansion plans to China helps to boost Raffles Medical Group’s revenue


Raffles Medical Group (SGX:BSL)


What business Raffles Medical Group is in?

Raffles Medical Group (“RMG”) is an integrated healthcare provider that provides a wide variety of medical services. It operates in Singapore, Vietnam, Cambodia, Japan and China.

Raffles Medical have three core business segments. Namely:

  1. Healthcare services – Providing health insurance, medical services
  2. Hospital services – Providing medical services and operation in hospitals. It also involves in medical laboratory and imaging business
  3. Investment holdings – Investing into other medical and dental companies

Market Trends

Rising affluence in Asia

Given the rising affluence in Singapore and other regional countries, it is expected that more people are willing to seek medical attention in private hospitals. Private hospitals are often being perceived of being capable to deliver premium and better healthcare compared to public hospitals.

Ageing population

As the baby boomer approaching retirement age, coupled with increasing life expectancy, the demand of healthcare is expected to increase. According to a news article, Singaporeans are expected to spend US$37,427 for every elderly by year 2030. The projected expenditure is expected to grow at 10% annually.

Singapore is also expected to have more elderly within its demographics. According to official projection, it is expected that 25% of the Singapore population will be aged 65 and above by year 2030. This is 11% higher compared the current 14% who is aged 65 and above.

Growing health consciousness among peoples

With growing awareness of early detection for diseases, the demand for preventive healthcare is set to grow. According to a report, preventive healthcare in Asia Pacific is expected to grow at 15% annually.

How RMG benefits from these trends?

RMG is expected to grow its market share given to its expansion plan outside Singapore. In 2015, RMG is building 400-bed hospital in Shanghai which is expected to be open in 2018. RMG could tap on the rising demand for quality healthcare due to rising affluence in China’s population.

RMG earns a reputation for providing quality healthcare with JCI-accreditation. RMG is positioned to attract medical tourists due to its capability of providing high-quality healthcare. More than 35% of Raffles Hospital’s patients are foreigner. This shows that RMG has successfully created brand loyalty among international patients.

There are evidences suggesting that the cost of implementing employee wellness programs could result in greater savings from employees’ medical cost, RMG actively partners with companies for corporate healthcare solution. As a winner for Best Corporate Healthcare in 2015, more companies will be inclined to partner with RMG for its corporate healthcare programs.

Financial analysis

After discussing on RMG will benefits from these trends, let us take a look at how RMG had performed compared to its competitors.



As shown above, RMG performed relatively stable compared to its competitor. Based on latest twelve months’ figures, RMG had generated 12.14% Return on Equity and 9.43% Return on Assets. However, RMG Return on Equity had fell steadily over the years.


Despite a strong upward trend in revenue, both net income and free cash flow are not growing at the same pace as revenue. This shows that RMG is facing heavy cost pressure. The high staff cost has taken up between 48%-49% of its revenue that generated over the last 5 years.


Risks involved

Despite being well-positioned the future, investing in RMG still carries some risks. This includes:

  • Foreign investment risk: Shanghai is currently experiencing shortage of doctors. RMG might be facing heavy cost pressure in order to attract doctors working in Shanghai hospital when it is operational in 2018.
  • Foreign exchange risk: Appreciating Singapore Dollar against regional currencies could result in a fall in medical tourism for Raffles Hospital in Singapore.

Is Raffles Medical Group worth buying?

With the recent opening of Raffles Holland V, revenue from healthcare and service division grew by 39.7% for the first 9 months in 2016. Profit After Tax and Minority Interests (PATMI) grew by 4.1% based on first 9 months in 2016. This seems to be a good news for investors like us. However, we need to take into consideration of price that we pay for.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett

Let us look into how the market is paying for RMG compared to its competitors.


When compared to its competitors, RMG seems to be relatively undervalued. Let us compare with historical RMG’s P/E ratio.


By looking at historical RMG P/E, it seems that market is currently paying RMG at a premium. RMG is priced at 34.1 times, 26% higher compared to its historical average P/E ratio. This indicates that RMG is relatively overpriced relative to its historical pricing.


RMG is well-positioned for growth given the future market trends and how RMG responded to it. However, as value investors, we should be mindful of paying for the right company at a fair price. I believe that RMG is a good company worth looking out for. However, in the short-term, RMG seems to be overpriced by the market. Along with rising staff cost, my stand is to hold on RMG. As value investors, we should invest into company that is undervalued. I believe that there will be opportunity for us to invest into RMG in the future.

If you want to know more about when to buy stock at the right time, click on the picture below to register for our Free Value Investing Masterclass.


Research Analyst, Mind Kinesis Value Investing Academy

Disclaimer: Please note that all information stated in this article is just for education purpose only and should not be used as any form of recommendation or advice.

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