RAFFLES MEDICAL GROUP | BUY
TARGET PRICE: S$1.76
JAN 5 CLOSE: S$1.455
RHB, Jan 5
We expect Raffles Medical Group to benefit from Singapore's ageing population as well as an increased sophistication in medical insurance plans. The supply shortage of public hospitals is likely to result in a spillover demand to private players. One such example is a joint initiative with the Ministry of Health which sees Raffles Medical managing emergency patients. Moreover, Raffles Medical has not seen a decline on its foreign patient load.
We expect Raffles Medical to deliver solid net profit growth of 27 per cent in 2017 aided by rental income at Raffles Holland V mall. Some 95 per cent of the space has been committed.
Operations of its new medical centres are improving. We expect operating profitability of the medical centres at Raffles Orchard and Raffles Holland V to turnaround in 2017 while International SOS is also expected to deliver a higher contribution. The long-awaited Raffles Hospital extension is set to be completed by 2H17. Key risks include a further slowdown in Singapore's medical tourism and delay in hospital construction.
HUTCHISON PORT HOLDINGS TRUST | BUY
TARGET PRICE: US$0.46
JAN 5 CLOSE: US$0.43
OCBC Investment Research, Jan 5
The yoy growth rates for Hong Kong Kwai Tsing monthly throughput have become increasingly positive, from -17.6 per cent in Feb 2016 to +10.3 per cent in November 2016, with overall throughput for Jan-Nov 2016 down 3.7 per cent yoy. We have become slightly more positive in our assumptions for HPH Trust's Hong Kong operations. With Yantian container throughput flat for the Jan-Nov 2016 period on a yoy basis, we are less bearish on its Yantian operating outlook, and increase our growth rate from -4.5 per cent to -3.0 per cent for FY16.
Last month HIT, COSCO-HIT and ACT entered into a co-management agreement for collaboration on the operation of 16 contiguous berths they occupy across Kwai Tsing Terminals. We believe the arrangement will allow HPH Trust to compete more effectively for contracts with shipping alliances. Looking forward to the rest of 2017, we expect the alliances to negotiate contracts with terminals, a process which may introduce volatility in both throughput and tariff rates. Current price levels are attractive in combination with the high yield of 8.0 per cent for FY17F. We upgrade HPHT from a Hold to a Buy on valuation grounds.
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