facebookRaffles Medical Group (SGX: BSL): A Singapore Stock To Look Into for November 2021 and Beyond
Raffles Medical analysis

Raffles Medical Group (SGX: BSL): A Singapore Stock To Look Into for November 2021 and Beyond

profileSudhan P

Private healthcare provider Raffles Medical Group Ltd (SGX: BSL) saw its shares fall recently.

Over the past five days, Raffles Medical’s share price has tumbled 11% to S$1.39 at the time of writing.

Source: Google Finance

However, I think the recent selldown is an opportunity for long-term investors to consider looking into Raffles Medical.

Let’s explore more right here…

TL;DR: Raffles Medical — A Stock To Consider for Nov 2021

Here’s why Raffles Medical is worth another look:

  • Raffles Medical not only has a presence in Singapore but has operations in 14 cities across Asia
  • The company’s finances are in the pink of health. From 2008 to 2020, Raffles Medical’s revenue and profit after tax have trended upwards.
  • With the increase in net profit, the company also managed to grow its dividends.
  • Raffles Medical has a strong balance sheet to withstand any economic shocks.
  • The pandemic has shown that being a healthcare provider, the company’s services are essential.
  • There’s potential for the company to grow in Singapore and overseas, including in China.

Understanding Raffles Medical’s Business

Raffles Medical was established in 1976 in Singapore but has now a presence in 14 cities in five countries across Asia.

The healthcare outfit is a well-known and trusted brand with many experienced medical professionals under its headcount of over 2,700 employees. 

It serves more than 2 million patients and 7,000 corporate clients each year. 

Raffles Medical has three business segments that it makes money from, and they are:

  • Hospital services
  • Healthcare services
  • Investment holdings

Hospital Services

The hospital services segment offers specialised medical services and is involved in the operation of hospitals such as its flagship Raffles Hospital in Singapore. 

For 2020, the hospital services segment brought in 50% of Raffles Medical’s total revenue. 

The following chart shows the hospital services segment’s revenue growth from 2016 to 2020:

Source: Raffles Medical 2020 Annual Report

Healthcare Services

Next, revenue from healthcare services comes from the operations of medical clinics and other general medical services.

Raffles Medical also provides health insurance — called Raffles Shield — and trading of pharmaceutical products.

For 2020, the healthcare services segment brought in 45% of Raffles Medical’s total revenue for the year. 

Here’s a look at the division’s revenue performance over the past five years:

Source: Raffles Medical 2020 Annual Report

Investment Holdings

Last but not the least, the investment holdings segment mainly owns investment properties.

The group’s investment properties include shop units within Raffles Hospital and Raffles Specialist Centre, units of commercial space within Samsung Hub and Raffles Holland V that are leased to external parties.

All the assets are in Singapore.

For 2020, this segment brought in 5% of Raffles Medical’s total revenue for the year. 

Source: Raffles Medical 2020 Annual Report

In terms of geographical breakdown for 2020, Singapore brought in the bulk of revenue at 91.2%, followed by Greater China (6.0%) and the Rest of Asia (2.8%).

Solid Business Fundamentals

Now that we have seen an overview of Raffles Medical’s business, let’s take a look at how the company has performed financially over the past decade or so:

(S$' 000)
200,769218,610239,123 272,783311,633340,989374,641410,535473,608477,583489,135522,038568,203
Profit After Tax
(S$' 000)

31,66038,03345,48250,62157,20964,90767,962 69,03167,94668,66170,80360,52264,670
Return on Equity (%)
Diluted Earnings per Share (cents)2.012.412.843.123.473.863.994.

(Note: Diluted earnings per share has been adjusted for 3-for-1 share split in 2016)

We can see that from 2008 to 2020, Raffles Medical’s revenue has grown around 9% annually from S$200.8 million to S$568.2 million.

Likewise, the healthcare company’s profit after tax has increased 6% per annum from S$31.7 million to S$64.7 million during the same period.

In terms of dividend growth, Raffles Medical’s dividends improved from 2.0 Singapore cents per share in 2016 to 2.50 cents in 2020.

For the six months ended 30 June 2021, which is the latest reported period, Raffles Medical’s revenue rose 42.4% year-on-year to S$343.8 million.

The increase was due to higher revenue from its Healthcare Services and Hospital Services business segments.

With that, Raffles Medical’s net profit grew by 128.7% to S$39.4 million.

Raffles Medical also generated strong free cash flow for the latest period, which came in at S$43.2 million, up from S$7.4 million a year ago.

Free cash flow is money that can be used by Raffles Medical to reinvest into its own business, pay off its borrowings, buy back its own shares, or dish out dividends to its shareholders.

As of 30 June 2021, the company had S$215.7 million in cash and cash equivalents and S$211.8 million in total debt, giving a net cash position of around S$4 million.

Raffles Medical’s healthy balance sheet will help the company tide through any harsh economic conditions.

How Does Raffles Medical’s Future Look Like?

There are multiple ways for Raffles Medical to continue growing in the future, both in the short and long term.

Growth in Singapore

In 2017, the company expanded Raffles Hospital at Bugis to further increase its breadth and depth of clinical services.

The increase in floor space will enable it to grow its clinics and bed spaces, and offer new clinical services such as radiotherapy for cancer treatment.

The extension would also provide Raffles Medical with the “capacity to grow for the years to come”, according to its 2017 annual report.

Furthermore, Raffles Medical collaborates with the Ministry of Health (MOH) to manage emergency patients in Singapore.

Dubbed the Emergency Care Collaboration (ECC), Raffles Hospital’s accident and emergency (A&E) department will provide care to patients sent in by Singapore Civil Defence Force (SCDF) ambulances for emergency medical care and subsequent follow-up care.

These patients pay subsidised rates similar to what they would pay in public hospitals and help improve patients’ access to A&E services.

The ECC came in handy during the depths of the COVID-19 pandemic last year, where it provided relief to the government hospitals to concentrate on caring for and saving those with severe COVID-19 illnesses.

Raffles Medical is also involved in Singapore’s vaccination drive.

Across its centres, it can administer more than 10,000 vaccinations each day.

Even though most of our population is fully vaccinated, the need for booster shots will keep Raffles Medical busy for some time.

With the branding that Raffles Medical has built up in Singapore over the past 45 years and its connected network of clinics across our island, it is poised to continue doing well here, especially with the ageing population we are facing.

Growth overseas

Outside of Singapore, Raffles Medical is not resting on its laurels.

The company is investing for future growth with new hospitals in China’s Chongqing and Shanghai.

Raffles Medical officially opened Raffles Hospital Shanghai recently.

Located in Qiantan, Pudong, the hospital will provide a suite of comprehensive medical services ranging from 24/7 emergency medicine, inpatient and outpatient services that include family medicine, cardiology, obstetrics and gynaecology, and dentistry.

The hospital in Chongqing is already welcoming patients.

In its 2020 annual report, the company said that Raffles Hospital Chongqing is “now serving markedly more patients than before the COVID-19 pandemic, as it becomes better known and patients are in turn recommending their loved ones and friends to our hospital”.

In a Straits Times interview back in 2015, Raffles Medical’s founder Dr Loo Choon Yong said he envisions revenue from overseas to make up more than 50% of total revenue, up from below 10% in that year.

Dr Loo’s wish could come true one day.

There is massive potential for the two China hospitals, considering the total addressable market in Shanghai and Chongqing is many times larger than Singapore’s.

With its rock-solid balance sheet and a long runway for growth in a resilient industry like healthcare, Raffles Medical should continue performing well.

At Raffles Medical’s share price of S$1.39, it has a price-to-earnings ratio of 29x and a dividend yield of 1.8%.

Looking for More Stock Analyses to Position Your Portfolio for 2021 and Beyond?

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer owns shares in Raffles Medical Group. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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