Raffles Med braces for muted earnings as expansion plans gain steam

Higher staff costs are on the horizon.

Raffles Med's shareholders should brace for a muted earnings outlook in upcoming quarters as the group's aggressive expansion plans continue to gain steam.

In the first quarter, Raffles Med's staff costs grew 15% year-on-year as it hired 121 new personnel including doctors, nurses, and ancilliary staff.

The hiring spree was in preparation for the group's expansion projectsm namely Raffles Hospital extension, Raffles Holland Village and the newly announced medical centre at Shaw Centre

Analysts warn that while upgrading its facilities will be positive in the long-term, Raffles Med remains under threat from dampening medical tourism and the strong SGD.

"While we are positive on expansion, competition from new private hospitals and currency weakness in neighbouring countries such as Indonesia and Malaysia could affect its medical-tourism revenue," stated Maybank Kim ENg.

"Outlook for 2Q15 is likely to stay muted on the back of a strong Singapore dollar and dampening
medical tourism. With both the Shaw medical centre and the Emergency Care Collaboration slated to commence in mid-2015, we expect to see slight positive contribution to patient volumes from 3Q15. Management has indicated that it is still in discussions on expansion plans for China although no agreement has been signed yet," added DBS.