Raffles Medical May Buy Centers to Tap Spending: Southeast Asia

Raffles Medical Group Ltd., Singapore’s second-largest private medical-services provider, may seek acquisitions to capitalize on rising health-care spending in Asia after expansion plans stalled.

The company will consider buying a small center in Singapore offering specialized services if there are suitable opportunities, Chief Financial Officer Lui Chong Chee said in a telephone interview from the city-state. He declined to identify potential targets.

“There is still a tremendous amount of opportunities, whether in Singapore or China, for us to expand the provision of health care,” Lui said July 2. “There is wealth in Asia, and demographics are looking good in terms of population growth plus the aging population.”

Raffles Medical joins Religare Health Trust and IHH Healthcare Bhd., Asia’s biggest health-care provider by market value, in tapping industry sales that’s forecast to almost triple within five years. Hospital revenues in the Asia-Pacific region will climb to $1.09 trillion by 2017 from $377.9 billion last year, aided by rising incomes and prevalence of chronic diseases, according a June 5 report by Frost & Sullivan.

The shares added 1 percent to S$3.20 at the close in Singapore. Raffles Medical climbed 22 percent this year, compared with a 0.6 percent decline for the benchmark Straits Times Index.

Plan Approval

The company still hopes the Singapore government will approve plans first proposed three years ago to expand its flagship hospital in the city-state, Lui said. Raffles Medical is a lot closer to getting approval for the project, which will boost the facility’s space by about one-third from 300,000 square feet currently, he said, without specifying a time frame.

Lui declined to comment on the delay, as did Melissa Lee, a spokeswoman at the Urban Redevelopment Authority, the government agency responsible for approving such projects.

Singapore authorities rejected the hospital operator’s proposal to convert part of a building near the city’s Orchard Road shopping belt into a medical center, Raffles Medical said in March. It has since put up the property for sale.

Raffles Medical was also among companies that lost a bid for a hospital site in Hong Kong to IHH and NWS Holdings Ltd. in March. IHH’s Parkway Holdings Pte. operates the Gleneagles and Mount Elizabeth hospitals in Singapore, and beat Raffles Medical in another hospital site auction in the city five years ago.

More Aggressive

Raffles Medical generates almost all its earnings in Singapore, where it runs Raffles Hospital and 78 clinics, according to its website. The company also has medical centers in Hong Kong and Shanghai.

“Taking a more aggressive approach in regional expansion is important in the medium to longer term phase as there is a limit to how much you can grow in Singapore eventually,” James Koh, an analyst at Maybank Kim Eng Holdings Ltd. in Singapore, said by telephone yesterday.

The brokerage is one of six recommending investors buy Raffles Medical shares, while four suggest holding and one selling, according to data compiled by Bloomberg.

Net income rose more than 12-fold in the past decade to a record S$56.8 million ($45 million) in 2012, according to data compiled by Bloomberg. Profit may climb to S$62.7 million this year, according to the average of 10 analyst estimates compiled by Bloomberg.

Raffles Medical, in partnership with China Merchants Group Ltd., signed an agreement in January to build a 200-bed hospital in the southern Chinese city of Shenzhen. The company will consider building more hospitals in the cmnsountry and is focused on Shanghai, Beijing and Shenzhen, Lui said.

“Private hospitals are a scarce commodity” in China, Lui said. “We think that China provides us the so-called opportunities.”