Raffles Medical Group's healthcare revenue down 1.1%

The group is depending on rental income for its near-term growth.

The outlook is bearish for Raffles Medical Group as Singapore continues to face a slowdown in patient flow.

According to RHB analyst Juliana Cai, near-term growth for the group is supported by rental income rather than organic growth. She noted that Holland V medical centre was fully let out by 2Q17.

"Yet, despite a rental income booster from Holland V, revenue from healthcare services still fell by 1.1% in Q2, implying a stronger decline in core revenue," the analyst said.

On the hospital services side, revenue grew marginally at 0.3% in Q2.

However, Raffles Medical Group cited that some of the foreign patients who came for diagnosis could not afford the treatment, leading to a single digit percentage decline in inpatient numbers.

"We think there might be a structural decline in inpatient load moving forward if the economic outlook in the region remains weak," the analyst said.

She furthered, "Henceforth, whilst we expect an uplift in FY18F revenue driven by the hospital extension, we think most of it is still coming from rental income as 50% of the new space would be let out."