During its FY2024 results, RMG announced its intention to buy back up to 100 million shares in FY2025. However, the group only bought back about 20 million shares thus far. “Given the group’s net cash position of about $283 million (ex lease liabilities) as of 1HFY2025, we believe RMG could enhance shareholder returns through other means such as special dividends,” says Tay.
Assuming an average share buyback price of $1/share, the analyst estimates RMG would have about $80 million of budget left, translating into approximately 4.4 cents per share.
Considering FY2026F is RMG’s 50th anniversary, he also thinks that RMG could augment its core dividend of 2.5 cents (unchanged y-o-y) with an additional 2.5 cents to bring FY2025 dividend to 5.0 cents, which translates into a total cash payout of about $92 million (representing an FY2025 yield of around 5%).
However, Tay is waiting for the group’s overseas venture to contribute more significantly. Despite venturing into overseas markets as early as 1995 and about 32% of the group’s non-current assets outside of Singapore (in 1HFY2025), revenue contribution outside Singapore only made up about 10% of RMG’s 1HFY2025 revenue
Notably, its China hospitals in Chongqing and Shanghai, which opened in end-2019 and early 2021, respectively, have yet to achieve breakeven. In 2023, RMG also entered into a strategic partnership agreement to acquire a majority stake in American International Hospital (AIH) in Vietnam, valued at US$45.6 million ($58.8 million) in entirety. Since then, AIH is also managed by RMG under a management service agreement, pending regulatory approval for the acquisition.
“We lower our FY2025-FY2027 EPS by 5.4%-8.2%, predominantly to account for a larger share base from a slower pace of its share buyback, alongside slightly higher depreciation expenses,” says Tay.
As at 2.00pm shares in RMG are trading at $1.02, 21.4% higher in the past 12 months.
