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Raffles Medical posts positive earnings as it drives expansion into Greater China - 2018 Annual Report

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Raffles Medical Group Limited (RMG)

Source: RMG

Founded in 1976, RMG is an integrated private healthcare provider operating medical facilities in 14 cities across Asia. It is the only private medical provider in Singapore that owns and operates a fully integrated healthcare organisation comprising a tertiary hospital.

FY 2018 Financial Highlights:

Source: RMG FY 2018 Annual Report

  • RMG’s revenue improved by 2.4% from SGD 477.6 million in FY 2017 to SGD 489.1 million in FY 2018.
  • The company’s FY 2018 EBITDA also rose by 7.8% year-on-year to SGD 102.5 million.
  • Meanwhile, profit after tax increased by 3.1% to SGD 71.1 million in FY 2018. This increase lagged behind the growth in EBITDA due to higher tax expense and additional depreciation arising from the recently completed Raffles Specialist Centre.

Performance Drivers:

Source: RMG FY 2018 Annual Report

RMG comprises three main divisions: Hospital Services, Healthcare Services and Investment Holdings. Both the Healthcare Services and Investment Holdings divisions experienced an overall improvement in performance in FY 2018, while the Hospital Services division recorded a marginal decline. Traditionally based in Singapore, RMG has also been making significant headway into the Greater China market.

Performance Drivers (Positive Factors)

  • Healthcare Services Division

RMG’s Healthcare Services division generates revenue from the operation of medical clinics and other general medical services; the provision of health insurance; the trade of pharmaceutical and nutraceutical products and diagnostic equipment; as well as the provision of management and consultancy services.

Accounting for 41% of RMG’s total FY 2018 revenue, the Healthcare Services division improved its revenue by 6.0% from the previous year. This improvement stemmed from contributions from a new contract to provide Air Borders screening services, as well as the addition of new corporate clients.

One of the sub-segments highlighted – Raffles Chinese Medicine – recorded a year-on-year increase in revenue. The increase was attributed to the listing of services online, which allowed the business to reach a wider group audience through social media avenues. RMG also observed an increasing number of people seeking natural solutions for pain management and wellness.

Another sub-segment – Raffles Health – also experienced revenue growth for FY 2018 via its e-commerce site. Raffles Health is a wholly-owned subsidiary of RMG selling health supplements. Further, the subsidiary partnered Industrial and Commercial Bank of China on a cross border e-commerce project in China. This partnership is part of RMG’s plans to further expand into China.

On top of that, another subsidiary – Raffles Health Insurance – launched RafflesShield in 2018. It is a hospital and surgical insurance plan designed by medical experts for members of the public. RafflesShield is a Medisave-approved Integrated Shield plan, and is the 7th player to enter the Shield market.

  • Investment Holdings Division

RMG’s Investment Holdings Division comprises the company’s investment holdings and those relating to investment properties. Accounting for 5% of RMG’s total FY 2018 revenue, this division achieved a 36.4% increase in its revenue to SGD 29.2 million.

  • Greater China

Going by geography, RMG’s revenue derived from Greater China grew from SGD 38.5 million in FY 2017 to SGD 39.8 million in FY 2018. This comes as the company continues its plans to further its reach into the region. RMG completed the construction of Raffles Hospital in Chongqing in 2018, and the 700-bed hospital is both RMG and Singapore’s first international tertiary hospital in China. This venture supports the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity. Meanwhile, RMG opened a new company clinic at a major Chinese bank in Hong Kong, expanding its Hong Kong operations to seven such company clinics currently.

Performance Drivers (Negative Factors)

  • Hospital Services Division

RMG’s Hospital Services division generates revenue from the provision of specialized medical services, inpatient services and business of medical laboratory and imaging center.

Accounting for 54% of RMG’s overall revenue in FY 2018, the Hospital Services division suffered a marginal year-on-year decline in revenue of 0.8% to SGD 289.4 million. This was partly as a result of expenses related to the refurbishment of the current inpatient facilities in 2018.

Source: RMG FY 2018 Annual Report