Raffles Medical Group Ltd. Set For Healthy Expansion
By Ser Jing Chong - January 22, 2014
Healthcare provider Raffles Medical Group (SGX: R01) announced earlier this morning that it has agreed to purchase a plot of land from the Singapore Land Authority for S$105.2m.
This is the company’s second major acquisition after it announced last month it would be spending some S$120m in total to buy and develop a property located at 100 Taman Warna, Singapore.
The land in question in the latest acquisition, with an area of 1,978 square metres (sqm), is located just beside the company’s eponymous Raffles Hospital at North Bridge Road, Singapore. With a plot ratio of 5.6 times, the piece of land would ultimately have a gross floor area of 11,078 sqm.
Currently, Raffles Hospital has a gross floor area of 28,605 sqm, which can be expanded by an additional 9,535 sqm. With the new piece of land, the company’s healthcare facilities at North Bridge Road can reach up to 49,217 sqm. Both Raffles Hospital and the acquisition target have 99-year leases that started on March 1979, meaning to say the company has another 64 years or so to utilise the real estate.
According to RMG’s press release regarding the acquisition, the expansion offers “a strategic opportunity [for Raffles Hospital] to expand its facilities and services synergistically, and to naturally develop a comprehensive and integrated medical complex.”
Loo Choon Yong, executive chairman and co-founder of the company, commented on the acquisition: “The proposed extension will offer a runway for the hospital’s expansion and growth for the next 10 years, and contribute to Singapore’s vibrancy as a medical hub by offering integrated facilities and services for healthcare services, life sciences, research and teaching.”
RMG also shared some of its plans with the expansion in its press release. For instance, the hospital’s education and clinical research activities can be expanded, and help support the training and development of the skilled healthcare employees that the company requires.
In addition, Raffles Hospital also has plans to “develop a number of centres of excellence, such as for cancer, heart diseases, infertility and spine and joints.” These centres will work together with their international peers as and when needed to bring in relevant skills, knowledge and technology to help improve the hospital’s services.
The company has estimated that it would spend a total of S$310m in developing the new plot of land with a construction period of 24 months. On the payment front, RMG has said that it would be funding it with a mixture of its own cash and bank borrowings. The company’s latest financials show it having S$146m in cash with only S$4.4m in debt.
While RMG’s balance sheet would weaken as it would need to take up loans for this acquisition – in addition to having to spend around S$120m for the afore-mentioned purchase and development of a property at 100 Tarman Warna – the debt-situation would likely not spiral out of control due to the company’s strong operating cash flows, which comes in at S$87m in the last 12 months.
The company mentioned in its last earnings release that it would be facing tougher competition due to new public and private hospitals being developed in Singapore and the region. There’s also no shortage of competitors in the healthcare space with companies like Healthway Medical Corporation Limited (SGX: 5NG), IHH Healthcare Berhad (SGX: Q0F), and Pacific Healthcare Holdings (SGX: P47) among others.
Historically, these competitors have had much more volatile profit margins as compared to RMG’s, which has not fallen below 15% from 2007-2012. This is a clue on the latter’s stronger operational excellence as compared to its peers.
But, if the competition does heat up and RMG’s profit margins get squeezed, what seems like great avenues for future growth in the two recent acquisitions made by the company might not pan out well after all.
All told, investors have to be aware that it’s not a given that these ventures would be a success and their progress is something that needs to be watched.
Frasers Centrepoint Trust (SGX: J69U), or FCT, which owns suburban retail properties in Singapore such as Causeway Point, Northpoint, Anchorpoint, YewTee Point and Bedok Point, saw its gross revenue for the first quarter of 2014 (1Q 2014) increase by 5% to $40 million, as compared to the previous year. The rise in revenue was largely due to improved revenue from Causeway Point, after the completion of addition and alteration works in the mall.
Net property income for 1Q 2014 was up 4.4% year-on-year to $28.3 million. Income available for distribution for the quarter rose 4.0% to $22.7 million. Distribution per Unit (DPU) was at 2.5 Singapore cents, an increase of 4.2% over the previous year.
As of 31st December 2013, the gearing level was at 29.7% and the weighted average debt maturity was 2.7 years. 95% of FCT’s borrowings are on fixed interest rate or have been hedged via interest rate swaps, with the average cost of borrowing at 2.7%. The net asset value is at S$1.77.
FCT’s portfolio occupancy stood at 96.7%, decreasing slightly from 98.4% in 4Q 2013. The decline was mainly due to a huge drop in the occupancy rate at Bedok Point to 80.2% from 96.7% in end-September 2013. The 16.5 percentage point decline was due to “on-going renovation of shop spaces of incoming tenants and vacancy from expired leases in the October-December 2013 quarter”.
Dr Chew Tuan Chiong, Chief Executive Officer of the manager of FCT, said, “Investors will be pleased that FCT continues to deliver steady growth and good performance in 1Q14. The Singapore economy is projected to grow between 2% and 4% in 2014. Against this backdrop, performance of FCT’s portfolio is expected to remain stable. Following the successful completion of asset enhancement for Causeway Point, the next growth catalyst for FCT is likely to come from acquisitions of pipeline assets.”
Two assets that can be injected into FCT have been identified. They are Changi City Point and The Centrepoint. They are part of 12 retail malls in Singapore managed by Frasers Centrepoint (SGX: TQ5), including the five malls that are part of FCT.
Shares of FCT closed at $1.79. The historical price-to-book ratio is at 1, meaning FCT is trading near its net asset value. The dividend yield is at close to 6%.
Singapore: Pursuant to the rehabilitation plan of Korean bulker giant STX Pan Ocean the company’s name is reverting to its old, pre-STX name, Pan Ocean from this Friday.
The company has arranged with the Singapore Stock Exchange where it is dual listed to change its trading counter name from STXPO 100 to Pan Ocean 100 with effect from Friday.
The sprawling STX conglomerate took over Pan Ocean a decade ago, but since the shipping crash of 2008 the group has been offloading units to appease creditors.
Pan Ocean’s stock has largely migrated back to Seoul from Singapore in the past 18 months. [21/01/14]
STX Pan Ocean: Trading Suspension To Be Lifted On 24 January 2014
22 Jan 2014 15:08
The trading suspension will be lifted on the re-listing date, 24 Jan 2014...
