Private healthcare provider Raffles Medical Group: BSL +3.41% announced that its net profit for the second half of the year ending December 31, 2024, increased by 4.3% to S$31.6 million from S$30.3 million in the same period last year.
The group also plans to repurchase up to 100 million shares within the next two years, accounting for 5.3% of its total issued ordinary shares, as stated in a filing submitted to the exchange on Monday (February 24).
Affected by this news, the stock rose 6.7% to a high of S$0.88 at 10:24 am and closed at that price on Monday.
At the post-results earnings briefing, Executive Chairman Dr. Loo Choon Yong said that the implementation of the share repurchase plan was due to the company's still-strong cash flow.
He added that the group's business in China continued to improve and would eventually increase Raffles Medical's cash flow.
He said, "We hope the company will grow, but if the accumulation of cash is faster than our investment opportunities, then we will distribute the cash to shareholders."
As of December 31, the group had S$343.7 million in cash and cash equivalents. Dr. Loo estimated that the amount to be spent within two years at Raffles Medical's current share price would be less than S$100 million.
He added that if necessary, the group is also willing to borrow and then let the cash flow catch up.
The board proposed to pay a final dividend of S$0.025 per ordinary share, slightly higher than last year's S$0.024. Once approved by shareholders, the dividend will be paid on May 23 after the close of registration on May 15.
The group also revised its dividend policy to distribute at least 50% of sustainable earnings each year. Dr. Loo did not rule out the occasional distribution of special dividends "when there is a lot of cash."
The earnings per share (EPS) for the second half of the year was S$0.017, compared to S$0.0163 previously.
H2 revenue increased by 14.8% to S$385.9 million from S$336.2 million in the same period last year.
Full-year net profit fell by 31% to S$62.2 million from S$90.2 million in the same period last year, with earnings per share of S$0.0335, compared to S$0.0485 previously.
Annual revenue increased by 6.3% from S$706.9 million to S$751.6 million.
The company said that due to the strong performance of the hospital services division throughout the year, revenue for the fiscal year 2024 will increase.
The division's revenue increased by 4.6% to S$345.7 million, and pre-tax profit increased by 9.5% to S$35.7 million.
The revenue of its medical services department increased by 4.1% from S$283.4 million to S$295.1 million. However, due to reduced government subsidies and the discontinuation of Covid-19 services in 2024 (compared to 2023), its pre-tax profit fell by 33% to S$45.1 million.
Views on China and the Special Economic Zones
Dr. Loo expects the group's hospitals in China to break even within one to two years and pointed out that its Beijing hospital has been profitable for some time.
He is optimistic about the Chinese market because Raffles Medical is well recognized in China, and most of its patients are Chinese.
In addition, he believes that the Chinese government's move to allow foreign companies to operate hospitals solely in certain regions is a positive step towards liberalizing the medical market.
Before this change, foreign companies could usually only own up to 70% of a hospital in China through joint ventures.
Dr. Loo said that if foreign companies own hospitals outright, they can avoid any "cooperation issues." He said that if foreign operators still want local companies to participate, the revised rules will make it easier for them to choose partners that meet their requirements.
However, Dr. Loo believes that it will still take some time for new foreign participants to take advantage of this policy.
Meanwhile, Raffles Medical said that rising costs could hurt Singapore's attractiveness as a regional medical hub, but the company plans to mediate this situation by seeking long-term growth opportunities in other markets.
Nevertheless, Singapore is known for its care standards, and patients with serious illnesses who can afford premiums may come to this city-state for better treatment, he pointed out.
As for the Johor-Singapore Special Economic Zone, Dr. Loo said the group has some cooperative clinics in Malaysia but is evaluating whether to set up some facilities there.
He said that while most Singaporeans would stay home to enjoy subsidized medical care, "people may want to go to Malaysia for health checks or wellness."
Shares in Raffles Medical Jump 10% in 2 days.