Raffles Medical Group Ltd. – Value Analysis (SINGAPORE:BSL) : December 26, 2017

Capitalcube gives Raffles Medical Group Ltd. a score of 59.

Our analysis is based on comparing Raffles Medical Group Ltd. with the following peers – Asiamedic Limited, Health Management International Ltd, OUE Lippo Healthcare Limited and Singapore Medical Group Limited (505-SG, 588-SG, 5WA-SG and 5OT-SG).

Investment Outlook

Raffles Medical Group Ltd. has a fundamental score of 59 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It’s current Price/Book of 2.70 is about median in its peer group.
  • The market expects BSL-SG to grow more slowly than its peers and for its median ROE to decline.
  • BSL-SG‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • Over the last five years, BSL-SG‘s return on assets has declined from above median to about median among its peers, indicating declining relative operating performance.
  • The company’s median gross margin and relatively high pre-tax margins suggest non-differentiated product portfolio but with tight cost control relative to peers.
  • While BSL-SG‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • BSL-SG has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

BSL-SG has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 3.77% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 8.51%), and a well-cushioned interest coverage level of 444.21x, BSL-SG can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 4 peers for the company have an outstanding debt balance.

BSL-SG has maintained its Quick & Able profile from the recent year-end.

  • BSL-SG‘s interest coverage has increased 314.55 points from last year’s low but is still below its five-year average interest coverage of 790.84.
  • While its interest coverage increased to 444.21x from 129.66x (in 2016), its peer median decreased during this period to 9.12x from 12.52x.
  • Interest coverage rose 317.96 points relative to peers.
  • BSL-SG‘s debt-EV is its highest relative to the last five years and compares to a low of 0.31% in 2014.
  • Like the interest coverage trend, while its debt-EV also increased (to 3.77% from 1.25%), its peer median decreased during this period (to 8.51% from 9.02%).
  • Relative to peers, debt-EV rose 3.04 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Asiamedic Limited 8.6 1.49 -24.55 -25.05
Health Management International Ltd 8.51 0.99 9.12 54.81
OUE Lippo Healthcare Limited 69.34 0.32 -0.56 -7.6
Singapore Medical Group Limited 4.74 1.55 22 103.45
Raffles Medical Group Ltd 3.77 1.02 444.21 130.92
Peer Median 8.51 1.02 9.12 54.81
Best In Class 3.77 1.55 444.21 130.92

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Company Profile

Raffles Medical Group Ltd. is an investment holding company, which engages in the operation of medical clinics and other general medical services. It operates through the following segments: Healthcare Services, Hospital Services, and Investment Holdings. The Healthcare Services segment includes the management of medical clinics; provision of healthy insurance, and management and consultancy services; and trading of pharmaceutical and nutraceutical products and diagnostic equipment. The Hospital Services segment provides specialized medical services and operates hospital and business of medical laboratory and imaging centre. The company was founded by Yong Loo Choon and Alfred Loh in 1976 and is headquartered in Singapore.


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