Get a glimpse of the healthcare sector's expansion plans

Raffles Medical eyes a seven-storey Specialist Centre worth S$100m.

According to OCBC, under our Healthcare sector coverage for the recently concluded 2QCY12 results period, Raffles Medical Group (RMG) reported PATMI which was slightly below expectations, while Biosensors International Group’s (BIG) core earnings were in line with estimates. 

Here's more from OCBC:

Both companies’ revenue grew double-digit YoY and matched our expectations, underpinned by robust demand for high-quality curative healthcare services (RMG) and continued market share penetration (BIG). Operating cashflow generated was also substantially higher YoY, allowing RMG and BIG to end the quarter with net cash of S$63.9m and US$306.7m, respectively.

We believe that the strong balance sheets of companies under our Healthcare sector coverage would buttress their abilities to expand their operations despite the current subdued macroeconomic conditions. Although RMG already incurred S$92.08m in capex for a seven storey building in Apr 2011 to house its upcoming Specialist Centre, there are ongoing plans for its Raffles Hospital extension (we estimate development costs and capex of ~S$100m).

In addition, RMG also recently submitted a tender for the development of a private hospital in Hong Kong. If successful, we opine that RMG would likely finance this with a combination of bank borrowings and internal resources. Meanwhile, given BIG’s huge cash pile and goal to transit into a first-class global medical device platform company, we believe that it would likely remain on the lookout for acquisition opportunities to expand its brands portfolio.