Here's why Raffles Medical will hit stronger gains amid staff costs hike

RMG's earnings will hump 24% to S$29.8m.

According to OCBC, the seasonally stronger 2H trend for Raffles Medical Group (RMG) is expected to continue in FY12, despite rising staff costs. This is supported by expected traction gains in its patient loads and room to raise charges, albeit on a gradual basis, given its competitive pricing vis-à-vis its major peers.

Here's more from OCBC:

We forecast RMG’s 2H12 revenue and core earnings to increase 8.2% and 24.0% HoH to S$162.1m and S$29.8m, respectively. This
also translates into a growth of 14.6% and 14.1% YoY, respectively.

For FY13, we believe that the commencement of operations at its new Specialist Centre in 1H13 would help boost RMG’s net margin
from 17.3% in FY12F to 17.7% in FY13F.

This would be driven by improved economies of scale, increased referrals to its Raffles Hospital and better utilisation of manpower
which were hired in preparation for its enlarged operations.

Based on forward PER valuations, RMG currently ranks as the second cheapest stock amongst its direct comparable peers from Singapore, Malaysia, India and Thailand, despite delivering the second highest estimated net margin, according to Bloomberg consensus data.

We further conduct our analysis on the PER trends of RMG and its peers set, and note that the ratio of RMG’s PER relative to its peers’
average is currently at a 13.5% discount to their 5-year average.