It was 8 years ago when I decided to purchase Thomson Medical over Raffles Medical (RMG). The decision made was not base on its financials or a study of its fundamentals but more of an emotional one. I simply bought Thomson because my first daughter was due in a year and my wife’s gynaecology was based at Thomson.
Do I regret the decision? Yes, but not because I bought Thomson as I did a good exit price when Peter Lim made it private. I regretted that I decided to choose one instead of buying both.
RMG has more than double its net profit and free cash flow since 2008. Stretched it to 2004, RMG has quadrupled its revenue, net profit and free cash flow. So RMG has a solid track record over the past decade.
RMG is expensive in terms of valuation and that has always stops me from buying it for the longest time. So why did I purchase it last year and buy even more this year? It boils down to the report I read from Motley Fool on the group’s near and mid-term plans and I am optimistic of its growth.
The group recently completed its development and started its operation of its Holland Village medical/retail complex. RMG is also building its extension in the adjacent land next to the current hospital. This is expected to be completed in the first half next year and will increase its capacity by 80%. The last development is a joint venture with Chinese state-owned enterprise Shanghai Lujiazui Group to develop a new 400-bed internal hospital in Shanghai. This is expected to be operational in 2018.
So if RMG is successful in its execution of its plan, then while valuation appears rich now, it is reasonable when one considers its growth.
I expect that in near term, the net profit might not grow as much due to expenses for expansion. Things will look brighter after the initial expenses.
I would love to hold it for as long as I can since it is a great company and should continue to grow for a long time.
20161H revenue grew by 21% but net profit grew by 4%. All is in line and will continue to hold on to my current holdings.