CGS International
July 29, 2025
Raffles Medical Group: Incremental Growth, China Expansion, and Peer Analysis – A Deep Dive into Asia’s Healthcare Leaders
Overview: Modest Growth Amid Insurance Headwinds
Raffles Medical Group (RMG) continues to demonstrate steady organic growth, reporting a 1H25 profit after tax and minority interests (PATMI) of S\$32.1 million, up 4.8% year-on-year. This performance aligns with both internal and consensus full-year estimates, representing 45.3% and 46.2% achievement rates, respectively. Revenue growth was seen across all business segments, with a notable, but manageable, impact from insurance services returning to a pre-tax loss due to upfront recognition of expected losses from new contracts.
Despite a modest 0.4% year-on-year revenue growth in China on a constant currency basis, forex effects led to a 1.9% decline. The insurance segment reported a pre-tax loss of S$3.1 million, attributed to anticipated losses from new insurance contracts. However, this may reverse in 2H25 if those losses do not materialize, potentially providing a boost to future results.
China Strategy: Building Reputation Through Strategic Partnerships
RMG is investing in long-term growth in China despite tepid short-term revenue. In April 2025, RafflesHospital Shanghai entered a strategic collaboration with Shanghai Jiao Tong University School of Medicine, fostering resource and knowledge sharing to elevate private healthcare standards. Similarly, RafflesHospital Chongqing established a partnership with the First Affiliated Hospital of Chongqing Municipality, enabling local patients to access RMG’s facilities and visiting specialists. These alliances are expected to enhance RMG’s reputation, improve bed utilization, and lay the groundwork for future expansion in China.
Financial Performance: Results and Forecasts
| Financial Year End (S\$ million) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue |
706.9 |
751.6 |
780.3 |
810.7 |
832.1 |
| Operating EBITDA |
153.2 |
128.2 |
130.6 |
137.7 |
146.3 |
| Net Profit |
90.15 |
62.24 |
70.84 |
75.68 |
82.94 |
| Core EPS (S\$) |
0.049 |
0.035 |
0.039 |
0.043 |
0.047 |
| Dividend per share (S\$) |
0.024 |
0.025 |
0.021 |
0.022 |
0.023 |
| Dividend Yield (%) |
2.24% |
2.34% |
1.96% |
2.06% |
2.15% |
| FD Core P/E (x) |
21.98 |
30.59 |
27.68 |
25.20 |
22.67 |
| EV/EBITDA (x) |
11.56 |
13.63 |
12.90 |
11.40 |
10.26 |
| ROE |
8.86% |
6.26% |
6.67% |
6.92% |
7.31% |
RMG’s 1H25 revenue reached S$378.4 million, a 3.5% increase year-on-year and in line with full-year forecasts. Other operating income dropped 67.1% due to lower government wage credits. Insurance expenses rose 4.2% to S$81.9 million, reflecting a 9.8% increase in net insurance services revenue. Net reinsurance expenses surged 57.1%, mirroring higher insurance activity. Staff costs grew modestly by 2.0%. EBITDA stood at S$63.0 million with a margin of 16.7%.
Net profit for 1H25 was S$32.1 million, generally in line with expectations, with 2H25 poised for stronger seasonal performance.
Valuation and Outlook: Reiterate Add, Target Price S\$1.20
RMG’s target price remains S\$1.20, representing an 11.7% upside from the current price of S\$1.07. The valuation is anchored on a 13x FY26F EV/EBITDA multiple, reflecting its 5-year mean. The investment case is underpinned by:
- Potential turnaround in China hospital operations
- Possible Vietnam government approval for the American International Hospital acquisition
- Prospects of increased share buybacks
Key downside risks include prolonged losses in China and increased competition from regional peers.
Peer Comparison: Asia’s Leading Healthcare Companies
| Company |
Ticker |
Rec. |
Price (LC) |
Target (LC) |
Market Cap (US\$m) |
CY25F P/E (x) |
CY26F P/E (x) |
CY25F ROE (%) |
CY25F EV/EBITDA (x) |
CY25F Dividend Yield (%) |
| Raffles Medical Group |
RFMD SP |
Add |
1.07 |
1.20 |
1,543 |
27.7 |
25.2 |
6.5 |
12.9 |
2.0 |
| IHH Healthcare Bhd |
IHH MK |
Add |
6.66 |
7.75 |
13,909 |
25.0 |
20.3 |
7.4 |
12.3 |
1.2 |
| Sunway Bhd |
SWB MK |
Add |
4.82 |
5.80 |
7,092 |
25.7 |
24.7 |
7.5 |
20.0 |
1.7 |
| KPJ Healthcare |
KPJ MK |
Add |
2.58 |
3.35 |
2,661 |
29.7 |
26.5 |
14.4 |
11.2 |
1.8 |
| Mitra Keluarga Karyasehat |
MIKA IJ |
Add |
2,430 |
2,800 |
2,065 |
27.3 |
23.9 |
18.3 |
16.9 |
1.9 |
| Siloam International Hospitals |
SILO IJ |
Hold |
2,130 |
2,300 |
1,693 |
26.3 |
24.6 |
11.7 |
12.0 |
0.7 |
| Medikaloka Hermina |
HEAL IJ |
Hold |
1,540 |
1,330 |
1,446 |
40.5 |
36.0 |
12.4 |
14.2 |
0.6 |
| Bangkok Dusit Med Service |
BDMS TB |
Add |
21.00 |
33.00 |
10,300 |
20.1 |
19.1 |
15.8 |
13.1 |
3.8 |
| Bumrungrad Hospital |
BH TB |
Hold |
146.0 |
152.0 |
3,582 |
17.7 |
17.8 |
22.0 |
10.8 |
3.6 |
| Bangkok Chain Hospital |
BCH TB |
Hold |
13.50 |
14.20 |
1,039 |
21.2 |
18.9 |
11.5 |
10.3 |
2.4 |
| Chularat Hospital |
CHG TB |
Add |
1.70 |
1.89 |
577 |
17.7 |
15.5 |
13.6 |
11.0 |
4.4 |
| Praram 9 Hospital |
PR9 TB |
Add |
24.10 |
33.50 |
585 |
21.5 |
18.7 |
15.2 |
11.3 |
2.1 |
Average valuation for regional hospitals sits at 24.1x CY25F P/E, with RMG at 27.7x — reflecting investor confidence in its unique positioning and future growth drivers.
ESG Performance: Progress and Challenges
RMG scored a combined ESG grade of C+ in 2024, with notable strengths in Environmental (C+) and Social (B), but a lower Governance score (D) due to board composition and tenure. The company’s high staff turnover, 32% in FY21 and 36% in FY22, is seen as an industry-wide phenomenon rather than systemic. Training hours per employee have risen to facilitate new staff integration, though injury rate disclosures have ceased since FY21.
Improvement in Social and Environmental scores offset the lower Governance rating. RMG operates within a resource-intensive industry, which may continue to weigh on ESG scores. Enhanced disclosure could boost its ESG standing and, potentially, its valuation.
Balance Sheet and Key Ratios
Key indicators as of Dec-25F:
- Total cash and equivalents: S\$352 million
- Total debtors: S\$168 million
- Inventories: S\$12 million
- Total current assets: S\$593 million
- Fixed assets: S\$729 million
- Total liabilities: S\$497 million
- Shareholders’ equity: S\$1,074 million
Performance ratios:
- Operating EBITDA margin: 16.7%
- Net cash per share: S\$0.15
- BVPS: S\$0.59
- Gross interest cover: 18.95x
- Effective tax rate: 27.0%
- Net dividend payout ratio: 53.6%
- ROIC: 15.6%
- ROCE: 8.7%
- Return on average assets: 4.08%
Key Takeaways for Investors
- RMG’s growth is incremental but steady, with key upside potential from China and Southeast Asia expansion.
- The insurance business drag in 1H25 may reverse in 2H25, supporting profit growth.
- Peer comparison shows RMG trading at a premium, justified by strategic partnerships and expansion opportunities.
- Ongoing improvements in ESG scoring and disclosure could unlock further valuation upside.
- Risk factors remain: China business performance and regional competition warrant close monitoring.
Conclusion: Well-Positioned for Consistent Earnings Growth
Raffles Medical Group’s diversified business model, strategic growth initiatives in China, and resilient financials underpin its investment appeal. The company’s prudent risk management, operational improvements, and focus on long-term partnerships position it to capitalize on Asia’s evolving healthcare landscape. With a reiteration of the “Add” rating and a target price of S\$1.20, RMG stands out as a key player for investors seeking exposure to the region’s healthcare growth story.
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