Raffles Medical Group Ltd’s Share Price Is Down 35% Since 2015. Is It a Good Business?
- Original Post from The Motley Fool Sg

Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and 13 cities in addition to two hospitals (one under development) in China.


At a current price of S$1.07, the company’s stock is down 35% from its peak in 2015 of S$1.65. This piqued my interest and inspired me to find out more about the company. Specifically, I want to understand if Raffles Medical has a high-quality business.


If it does, its current low stock price could be an investment opportunity. Unfortunately, there’s no easy answer to the question. However, a simple metric can help shed some light on the question: the return on invested capital (ROIC).


A brief introduction to the ROIC


In a previousarticle, I explained how ROIC can be used to evaluate the quality of a business.



The simple idea behind the metric is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs, while the reverse is also true — a low ROIC is often associated with a low-quality business.


You can see how the math works for ROIC in the formula above.


Raffles Medical’s ROIC


The table below shows Raffles Medical’s ROIC using numbers from its fiscal year ended 31 December 2018 (FY2018).



Source: Raffles Medical’s financial statement


In FY2018, Raffles Medical generated a ROIC of 10.7%. This means for every dollar of capital invested in the business, Raffles Medical earned 10.7 Singapore cents in profit. The company’s ROIC of 10.7% is average based on the ROICs of many other companies I’ve studied in the past. This suggests that Raffles Medical has an average-quality business.


Investors should be reminded that the ROIC is only one of the many aspects investors can use to assess the quality of a company’s business. It’s important to also take into account other qualitative factors when analyzing a company.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore recommends shares of Raffles Medical Group.


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Stocks to Watch: Singapore Airlines Ltd and Raffles Medical Group Ltd
- Original Post from The Motley Fool Sg


Earnings season is upon us again. Singapore Airlines Ltd (SGX: C6L) and Raffles Medical Group Ltd (SGX: BSL) are two companies that will be releasing their results this week. Here’s what to look out for.


First steps in China…


Raffles Medical Group opened its first hospital in China — Raffles Hospital Chongqing — earlier this year. In the first quarter of 2019, the group’s revenue grew 6.7% but profit attributable to owners declined 13.7%.


The loss was expected due to gestational loss of the new China hospital. Executive chairman, Dr Loo remained optimistic about the group’s expansion into China, saying,


“The opening of RafflesHospital Chongqing marks the beginning of a bold new venture into the Chinese healthcare market of 1.4 billion people, and it will provide the Group with unlimited opportunities to expand its services.”


Besides Raffles Hospital Chongqing, another hospital in Shanghai is currently under construction and is expected to open in 2020. Preparatory works for commissioning and operational phase has already begun in Singapore.


The group, which also operates Raffles Hospital in Singapore, has taken up loans to fund its investments. However, its core business is still generating a healthy cash flow. In the first quarter of 2019, cash flow from operations was S$21.7 million, compared to its net debt position of S$14.2 million. The cash generated will provide the group with the financial muscle needed during its first steps into China.


Raffles Medical Group released its second-quarter results earlier today. Investors should look out for updates on losses incurred in China and whether the construction and opening of Shanghai Hospital are within schedule. Raffles Specialist Centre in Singapore was also officially opened on 12 March 2019. This should provide another revenue stream to the group.


Climbing new heights


Singapore Airlines was in the spotlight earlier this year when it issued bonds to raise funds to increase its fleet.The group has now spent over S$11 billion over the last two years on aircraft, spares and engines as it embarks on a major expansion phase.


This is part of a three-year transformation program, whereby Singapore’s flagship carrier is working to pivot to keep relevant in the highly competitive airline industry. One of its business initiatives is to upgrade Silkair’s fleet to eventually merge it with Singapore Airlines.The group is also pushing to transform Singapore Airlines into one of the world’s leading digital airlines.


However, investors need to keep an eye on the group’s financial position. The parent company of Scoot is now in a net debt position of more than S$3 billion, from a net debt position of under S$1 billion at the start of FY2018.While the group continues to generate healthy operating cash flows, its high net debt position has weakened its financial standing.


Investors will also need to keep an eye on the fuel prices, which can materially impact the group’s operating costs.Singapore Airlines will be releasing its results on Wednesday, 31 July 2019.


Want to better understand how to benefit from the investing landscape here in Singapore? Click here now for your FREE subscription to The Motley Fool’s investing newsletter. ‘Take Stock’ lets you know exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead here


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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore recommends shares of Raffles Medical Group Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares of Raffles Medical Group Ltd.


$SIA(C6L.SI) $Raffles Medical(BSL.SI)

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2 Reasons Why Investors Shouldn’t Give Up on Raffles Medical Group
- Original Post from The Motley Fool Sg


Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and 14 cities. Also, it has two hospitals (one under development) in China.


In the last five years, investors have seen Raffles Medical’s share price decline by roughly 25%. This must have been frustrating for those investors, especially those who are accustomed to Raffles Medical’s strong share price growth. Yet, there are still good reasons to believe that the healthcare provider’s best days are ahead of it. Here are two of those reasons.


Provision of necessary services


Healthcare companies like Raffles Medical are generally considered as defensive stocks since their services are needed in both good and bad times. Moreover, the demand for such services will generally grow over time due to the general growth in population, as well as other factors like an ageing population, higher disposable income and others.


In the short term, investors might be persuaded to react to market noise (such as news on increased competition from neighboring countries) by selling Raffles Medical’s stock. However, they should not forget that Raffles Medical operates in an industry with favourable tailwinds and, thus, it should continue to benefit from such tailwinds over the long term. After all, who doesn’t need its services?


Growth opportunities


Historically, Raffles Medical has been a favourite of growth investors. Nowadays, there are signs that such investors might have given up on such hope. Yet, there are still good reasons to believe that Raffles Medical can grow. Firstly, it can grow its patient numbers by utilising the spare capacity of its existing facilities in Singapore. Next, it can expand its existing infrastructure to increase its capacity – such as its recent extension of its flagship Raffles Hospital in Singapore. Also, it can also open up new facilities, such as clinics to cater for more patients locally.


Another major growth driver for the company is its recent expansion into China through two major projects – a 400-bed international general hospital in Shanghai and a 700-bed international tertiary general hospital in Chongqing. The latter opened its door for business in January 2019 while the construction of the Shanghai hospital will be completed by fourth quarter of this year. In short, there is no shortage of growth going forward!


Conclusion


Investor sentiment towards Raffles Medical Group might not be positive. Yet, those who are willing to invest for the longer term might want to consider the merits of the company and its growth opportunities.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.



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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of Raffles Medical Group Ltd.


$Raffles Medical(BSL.SI)

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2 Reasons Why Investors Shouldn’t Give Up on Raffles Medical Group
- Original Post from The Motley Fool Sg


Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and 14 cities. Also, it has two hospitals (one under development) in China.


In the last five years, investors have seen Raffles Medical’s share price decline by roughly 25%. This must have been frustrating for those investors, especially those who are accustomed to Raffles Medical’s strong share price growth. Yet, there are still good reasons to believe that the healthcare provider’s best days are ahead of it. Here are two of those reasons.


Provision of necessary services


Healthcare companies like Raffles Medical are generally considered as defensive stocks since their services are needed in both good and bad times. Moreover, the demand for such services will generally grow over time due to the general growth in population, as well as other factors like an ageing population, higher disposable income and others.


In the short term, investors might be persuaded to react to market noise (such as news on increased competition from neighboring countries) by selling Raffles Medical’s stock. However, they should not forget that Raffles Medical operates in an industry with favourable tailwinds and, thus, it should continue to benefit from such tailwinds over the long term. After all, who doesn’t need its services?


Growth opportunities


Historically, Raffles Medical has been a favourite of growth investors. Nowadays, there are signs that such investors might have given up on such hope. Yet, there are still good reasons to believe that Raffles Medical can grow. Firstly, it can grow its patient numbers by utilising the spare capacity of its existing facilities in Singapore. Next, it can expand its existing infrastructure to increase its capacity – such as its recent extension of its flagship Raffles Hospital in Singapore. Also, it can also open up new facilities, such as clinics to cater for more patients locally.


Another major growth driver for the company is its recent expansion into China through two major projects – a 400-bed international general hospital in Shanghai and a 700-bed international tertiary general hospital in Chongqing. The latter opened its door for business in January 2019 while the construction of the Shanghai hospital will be completed by fourth quarter of this year. In short, there is no shortage of growth going forward!


Conclusion


Investor sentiment towards Raffles Medical Group might not be positive. Yet, those who are willing to invest for the longer term might want to consider the merits of the company and its growth opportunities.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.



More reading



The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of Raffles Medical Group Ltd.


$Raffles Medical(BSL.SI)

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1 Simple Number to Understand 3 Parts of Raffles Medical Group
- Original Post from The Motley Fool Sg

Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and 14 cities. Also, it has two hospitals (one under development) in China.


In this article, I want to dig deeper into Raffles Medical’s return on equity, or ROE.


The choice of ROE


Why the ROE some of you might be asking? That’s because the financial metric gives investors important insight on a company’s ability to generate a profit using the shareholders’ capital it has.


An ROE of 20% means that a company generates $0.20 in profit for every dollar of shareholders’ capital invested. In general, the higher the ROE, the more profitable a company is. A high ROE can also be a sign that a company has a high quality business.


That being said, it’s worth noting that the use of high leverage – which increases the financial risk faced by a company – can also increase a company’s ROE. So, that’s something to observe.


Calculating the ROE


The ROE can be calculated using the following formula, which is the way many investors do it:


ROE = Net Profit / Shareholder’s Equity


But, the ROE can also be calculated using a different approach shown below:


ROE = Asset Turnover x Net Profit Margin x Leverage Ratio


Doing so will reveal three important aspects about a company: How well it is managing its assets, how efficient it is at turning revenue into profit, and how much financial risk it could be taking on. For more information about this formula for ROE, you can go here.


With that, let’s turn our attention to the ROE of Raffles Medical.


The actual numbers


The asset turnover measures the efficiency of a company in using its assets to generate revenue. It is calculated by dividing a company’s total revenue by its assets.


For Raffles Medical, it had total revenue of S$ 489.1 million, and total assets of S$ 1, 116.3 million for its fiscal year ended 31 December 2018 (FY2018). This gives it an asset turnover of 0.44.


The net profit margin measures the percentage of revenue that is left as a profit after deduction of all expenses.In FY2018, Raffles Medical had a net profit margin of 14.5%, given its net profit of S$70.8 million and revenue of S$ 489.1 million.


Lastly, we have the leverage ratio, which shows the relationship of a company’s total assets to its equity. It is calculated by dividing total assets by equity. A higher ratio means that a company is funding its assets with more liabilities, hence resulting in higher risk. In FY2018, Raffles Medical had total assets and total equity of S$ 1,116.3 million and S$ 816.6 million, respectively. This gives a leverage ratio of 1.37.


When we put all the numbers together, we arrive at an ROE of 9%.


Foolish takeaway


Return on equity is a good metric to understand the quality of a business. Nevertheless, investors should be aware of (and understand) all the three components that make up the ROE. In general, I will pay more attention to asset turnover and profit margin since those two metrics better reflect Raffles Medical’s underlying business performance.


Last but not least, calculating the ROE is just the start of our research of a company. We should also compare Raffles Medical’s ROE with its peers, as well as its historical ROE, to get a better understanding of Raffles Medical’s performance.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of Raffles Medical Group Ltd.



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7 Highlights from Raffles Medical Group Ltd’s Q1 2019 Earnings
- Original Post from The Motley Fool Sg

Earlier this morning, Raffles Medical Group Ltd (SGX: BSL), or RMG for short, released its first quarter fiscal year 2019 (Q1 2019) earnings report. As a quick recap, RMG runs hospital and healthcare services in both Singapore and China, and has a network of clinics in both Singapore and four other Asian countries. In China, it has completed the construction of one hospital while another is under development.


Here are seven highlights from RMG’s latest earnings report:



  1. Revenue for Q1 2019 rose by 6.7% year-on-year to S$128.3 million from S$120.2 million a year ago. Revenue from healthcare services and hospital services divisions grew by 8.9% and 3.2%, respectively. For healthcare services, higher revenue was recorded due to an increase in premium from existing and new clients as well as the Primary Care Network (PCN) scheme and other projects. Hospital services saw better revenue contribution due to higher utilisation of hospital facilities.

  2. Due to higher start-up costs for Raffles Hospital Chongqing (RCQ), operating profit for RMG declined by 9.4% year-on-year to S$17.1 million. As a result, net profit after tax declined by 13.7% year-on-year to S$13.6 million. If the results of RCQ are excluded from the group, net profit after tax would have grown by 2.1% year-on-year. The company said that the gestation loss for RCQ is within expectation.

  3. RMG’s balance sheet remains strong with S$111.8 million of cash and S$126 million of debt. The group continues to generate healthy operating cash flows of S$21.7 million, while capital expenditure was elevated during the quarter at S$26.4 million due to the construction of Raffles Hospital Pudong in Shanghai, China.

  4. Raffles Hospital Singapore officially opened its new block Raffles Specialist Centre in March 2019. The complex is equipped with ambulatory and inpatient services from 31 different specialties, and would enable the group to provide quality care and services to customers.

  5. Another eight clinics were added to Raffles Medical clinics’ PCN of 40 clinics to enhance convenience to more patients and to branch out to more areas in Singapore for easier access to patients.

  6. The directors expect RMG to be able to grow its revenue and remain profitable for 2019, notwithstanding the expected gestation loss for RCQ.

  7. RMG’s trailing 12-months earnings per share stands at 3.84 Singapore cents. Based on the closing price for RMG of S$1.07 as of 26 April 2019, the group is trading at a trailing 12-months price earnings ratio of 27.9x. With a full-year trailing dividend of 2.5 Singapore cents, historical dividend yield stands at 2.3%.


All seems to be in order to at RMG, as the expected gestation loss for RCQ is within expectations. The group continues to demonstrate resilience in its core operations, with both divisions showing growth. With the opening of Raffles Specialist Centre and the addition of clinics to the PCN, both divisions should continue to witness healthy growth.


Raffles Health Connect’s platform, which was launched just three months ago in January 2019, should continue to see slow and steady uptake. Investors should maintain a long-term view with regards to RMG’s China expansion as it is still early days for the group, as it is anticipated that each hospital would need at least three to four years to break even.


There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.


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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has a recommendation for Raffles Medical Group Ltd. The Motley Fool Singapore contributor Royston Yang owns shares in Raffles Medical Group Ltd.


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