Report Summary

• Raffles Medical Group (RFMD) reported a strong 2H25 performance with PATMI up 21.7% year-on-year, driven by better operating leverage, fair value gains, and lower impairment losses.
• Healthcare services revenue declined due to scaling down of government transitional care facilities, but hospital and insurance services revenue grew, especially in Singapore and Greater China.
• RFMD maintains a robust net cash position (S\$261.1m), supporting higher dividends and potential M&A opportunities, with a 3 Scts DPS yielding about 2.8%, slightly above regional peers.
• Expansion plans in China are contingent on profitability turnaround in Shanghai and Chongqing hospitals; overseas M&A in Vietnam and Indonesia is also being explored.
• ESG score improved to B- in 2024, with higher marks in Environmental and Social pillars but still lagging in Governance due to board composition/tenure.
• The target price was lowered to S\$1.20, reflecting trimmed FY26F/27F EPS estimates due to reduced finance income from lower interest rates.
• Risks include prolonged losses in China and discontinued transitional care facilities affecting revenue.
• The report reiterates an “Add” rating, expecting continued dividend sustainability and possible re-rating catalysts through regulatory approval and faster China breakeven.