Raffles Medical FY 2016 AGM - Notes
Competitive Strengths
Executive chairman Dr Loo says that the business environment in Singapore is highly competitive.
Raffles Medical's (RMG) doctors are a part of the company and are shareholders. Space is not rented out for private practice doctors/specialists.
RMG's competitive strength: Look after patients thoroughly and compassionately, and charge them fairly. Dr Loo mentions that the hospital will also look after patients who have fallen into hard times and maybe unable to afford the fees. About 1% of patients default on medical fees.
Dividends
There is no fixed dividend policy or payout ratio, as cash may be needed when an opportunity presents itself.
20% of shareholders opt for scrip dividends, which the board feels is not that dilutive.
Acquisitions and Expansion
RMG will keep on investing to ensure growth, however expansion must be balanced. They will make acquisitions only if it is not overpriced, else growth will be organic.
Private hospitals are demand led; they cannot keep increasing supply of beds unlike subsidised public hospitals. Thus the new expansion of Raffles Hospital cannot focus solely on increasing the number of beds.
A shareholder queried about the $26 million of goodwill paid to acquire International SOS (ISOS), which is showing negative profits based on the subsidiaries' financial information in the annual report. Dr Loo explains that the acquisition enables RMG to set up base in Cambodia and Vietnam. Also the tangible assets acquired are mainly medical equipment and supplies. The goodwill paid is for the future potential earnings and synergies with existing operations. There are also plans to restructure ISOS. These losses are "translational."
China expansion: Piling work has began, building tenders will be called soon. Input has been taken from the end users to create a hospital worthy of the Raffles brand. Expected completion in 2019.
The people in the top 10% of the income bracket in China can now afford private healthcare. The healthcare sector there is now liberalising, and the board will ensure that the investment in China will earn returns.
The margins from the China hospitals being constructed should not be worse off than the margins in Singapore.
Overseas expansion will be more risky, due to the different business environment. Singapore will not offer much more growth opportunities, given the size of the population and the competitive healthcare environment. Expansion will diversify the risks rather than put all the eggs in 1 basket. RMG has been executing this strategy of expansion since the beginning. Dr Loo offers an analogy of planting a tree to bear fruit. It will take time to bear fruit, and one should not be tugging at the roots of the tree everyday when no progress is seen.
Vested at $1.41
Executive chairman Dr Loo says that the business environment in Singapore is highly competitive.
Raffles Medical's (RMG) doctors are a part of the company and are shareholders. Space is not rented out for private practice doctors/specialists.
RMG's competitive strength: Look after patients thoroughly and compassionately, and charge them fairly. Dr Loo mentions that the hospital will also look after patients who have fallen into hard times and maybe unable to afford the fees. About 1% of patients default on medical fees.
Dividends
There is no fixed dividend policy or payout ratio, as cash may be needed when an opportunity presents itself.
20% of shareholders opt for scrip dividends, which the board feels is not that dilutive.
Acquisitions and Expansion
RMG will keep on investing to ensure growth, however expansion must be balanced. They will make acquisitions only if it is not overpriced, else growth will be organic.
Private hospitals are demand led; they cannot keep increasing supply of beds unlike subsidised public hospitals. Thus the new expansion of Raffles Hospital cannot focus solely on increasing the number of beds.
A shareholder queried about the $26 million of goodwill paid to acquire International SOS (ISOS), which is showing negative profits based on the subsidiaries' financial information in the annual report. Dr Loo explains that the acquisition enables RMG to set up base in Cambodia and Vietnam. Also the tangible assets acquired are mainly medical equipment and supplies. The goodwill paid is for the future potential earnings and synergies with existing operations. There are also plans to restructure ISOS. These losses are "translational."
China expansion: Piling work has began, building tenders will be called soon. Input has been taken from the end users to create a hospital worthy of the Raffles brand. Expected completion in 2019.
The people in the top 10% of the income bracket in China can now afford private healthcare. The healthcare sector there is now liberalising, and the board will ensure that the investment in China will earn returns.
The margins from the China hospitals being constructed should not be worse off than the margins in Singapore.
Overseas expansion will be more risky, due to the different business environment. Singapore will not offer much more growth opportunities, given the size of the population and the competitive healthcare environment. Expansion will diversify the risks rather than put all the eggs in 1 basket. RMG has been executing this strategy of expansion since the beginning. Dr Loo offers an analogy of planting a tree to bear fruit. It will take time to bear fruit, and one should not be tugging at the roots of the tree everyday when no progress is seen.
Vested at $1.41
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