“We roll forward our valuation to blended forward earnings and increase the forward multiples to factor in the defensive nature of RMG’s earnings in the current uncertain macroeconomic environment,” says Jaiswal.
“We maintain our strong earnings growth outlook, which will be aided by higher revenue from its healthcare and hospital business segments, as well as its China operations gradually moving towards EBITDA breakeven in 2026,” he says, adding that earnings accretive acquisitions could further boost earnings.
The way Jaiswal sees it, the group’s healthcare revenue is expected to exceed pre-pandemic levels. In his previous report, Jaiswal noted that healthcare revenue in 2HFY2024 ended December 2024 is the “new run rate” as patient load has normalised and the segment is now “devoid of Covid-19-related revenue”.
Meanwhile, hospital revenue is expected to be boosted by China, as the hospitals there that were impact by the pandemic restrictions are now beginning to scale up operations.
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The group has also recently partnered with China’s Renji Hospital, an affiliate of the Shanghai Jiao Tong University School of Medicine, which Jaiswal sees as an opportunity for the group to tap into the expertise of Renji’s specialists as it continues to ramp up its operations.
“Margins for RFMD’s hospital segment should also gradually improve as the China operations move towards EBITDA breakeven levels in 2026,” he adds.
KGI Research Singapore too is bullish on RMG. It has reiterated its “buy” call on RMG with a target price of $1.04 and a stop loss of 92 cents.
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The research firm sees the Renji partnership as the group’s effort to “establish stronger ties”, as it aims to create a “dual circulation” system, allowing Raffles patients access to top Chinese specialists while offering Renji exposure to affluent patients across Asia.
“As China encourages domestic medical consumption and tourism, Singapore’s healthcare firms are well-positioned to expand their footprint,” says KGI, while noticing that Singapore-linked firms are making major strides in China’s healthcare sector despite economic headwinds.
KGI also likes the stock for its improved confidence and optimistic growth outlook. The group had recently revised its dividend policy to distribute at least 50% of its sustainable earnings annually and announcing plans to repurchase up to 100 million shares over the next two years.
Despite a 31% y-o-y decline in FY2024 net profit due to the cessation of Covid-19-related services and reduced government grants, RMG remains optimistic about its profitability in 2025 and anticipates continued expansion into new markets and meeting the rising demand for personalised healthcare.
China’s recent policy shift, allowing foreign healthcare providers to fully own hospitals in key regions like Beijing, Shanghai, and Guangzhou, presents a significant opportunity for RMG, says KGI. This allows the group to expand its footprint in China, capitalizing on its expertise to provide high-quality, personalized healthcare services tailored to both local and expatriate populations.
However, the group must also navigate regulatory requirements, such as the mandate that at least 50% of healthcare professionals in these hospitals must be from mainland China. By ensuring compliance and integrating international care standards, Raffles Medical can continue its expansion while maintaining high levels of service and reinforcing its brand presence in the Chinese healthcare sector.
RMG had also recently partnered with insurance group AIA. “This initiative is expected to enhance healthcare quality, improve patient access, and provide Raffles Medical with a larger base of AIA HealthShield Gold Max customers, driving higher patient volume,” says KGI.
Shares in RMG closed 3.8% higher on Apr 8 at 96 cents.
