Raffles Medical Group AGM 2023

Back at Suntec again. Everything goes electronics, including voting using mobile phone. But like what Mr Manu pointed out that it’s not right not to even provide hardcopy annual reports at the meeting, especially when the directors had them! My eyes might have played trick on me but it seems that Chairman Dr Loo was embarrassed by that but he regained composure quickly and noted the feedback.

Beyond the above, this is another AGM I enjoyed. Good questions asked by the shareholders and I learnt much from Dr Loo’s responses. Oh for once I don’t hear any question about dividend! Well I guess it is hard to ask for more when the group already increased it from 2.8 cents last year to 3.8 cents this this year.

As seen from above, it has been a fantastic year for the group, so most questions circled around how will things be going forward and China’s operation. Here’s what I remembered, meshed with my interpretation.

On Margin

Transitional care facility helped in 2nd half of 2022. Going forward, the group will still participate in TCF. They don’t see it as a growth area but it provides a bigger scale of operation. When asked for specific areas n next few quarters, Chairman jokingly said CFO reminded him cannot disclose. But he asked shareholders to consider the whole group performance. While healthcare segment might see less activities post-covid, the return of foreign patients means more activities for the hospital segment.

On current challenges

The group faced the same challenges like other businesses in current environment. Chairman highlighted there’s a healthcare shortage globally, giving example of 3 millions nurses shortage and New Zealand is even attracting them by offering PR. Having said that, Dr Loo reiterated that the group has faced many crisis over the years and on the ground the group worked hard to handle each of them and always emerged stronger.

On Raffles Health Insurance

The group has license for life insurance but only sells hospitalisation. They sell insurance to big company such as DBS and that will form part of their customer base. He shared that they learnt from a large US healthcare group Kaiser Permanente. I remember reading from annual report many years ago on a similar strategy for their healthcare services. Then the margin was much lower that that for hospital services but they continued with them as it forms part of the ecosystem to bring in the customers to the hospital.

On China Hospitals

Covid has definitely affected their operation, especially Shanghai. It typically takes a few years to break even. Beijing is likely to be the first to do that (even as early as this year), followed by Chongqing and they will considered this year as the first year for Shanghai.

The group does not open the hospitals in China for the expatriates as the volume is not large enough to support a hospital . Also, Chairman said that they do not need to attract the expatriate as they will come naturally to the hospital. The target group is local upper middle income, especially in Shanghai. He shared that Shanghai has a population of 24 mil, so just the top 10% is already half the population of Singapore.

China is a huge market but it is also a very tough one. Regulatory, people, training etc. So while it is very easy to expand in China, the question the group always think about is if it can be profitable. They need to make sure that they are stable and will have a team working there. Currently, Singapore provides the medical leadership at the hospitals but most doctors are local. In due course, there will be China leaders.

To sum up, the group is gaining traction in China and Chairman is happy with what he is seeing. He said that they went into China with the eyes opened and are not just looking at the next few years. To them 10 years later when things are stable, the hospitals will bring in the recurring cashflow.

Hearing the update strengthens my conviction to hold on to my current holdings. I might add more if opportunity arises in the coming months.


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