Room For Growth - Raffles Medical Group

HEALTHCARE
S I N G A P O R E
Raffles Medical Group:
Room For Growth
October 2007

Contents
Executive Summary ......................................................................... 1
Investment Highlights
– Room from Growth at Raffles Hospital ....................................... 2
– Leveraging on Extensive Network to Dominate
Corporate Market ......................................................................... 5
– Prime Beneficiary of Liberalisation of Medisave ......................... 7
Valuation .......................................................................................... 8
Financials .......................................................................................... 9
Company Background ................................................................... 12
Risk Factors .................................................................................... 15
Financial Statements ...................................................................... 16
Appendix: Medisave Withdrawal Limits........................................ 19

23 October 2007
Initiate Coverage
R AFFLES MEDICAL GROUP
Room For Growth
BUY
Current Price : S$1.42
Target (12-mth): S$2.05
Raffles Medical Group (RMG) is an integrated private healthcare provider. It operates
a network of 60 family medicine clinics in Singapore and four clinics in Hong Kong.
RMG's flagship Raffles Hospital commenced operations in Mar 01 and offers services
across 35 medical disciplines organised into 10 specialist clinics. The hospital delivers
integrated and coordinated medical care through its unique Group Practice Model.
Room for growth at Raffles Hospital. Raffles Hospital has stepped up the pace of
expansion adding 25 beds in 1H07 and making plans to add another 25 beds in 2H07
to bring the total to 200 beds. The recruitment of more specialists has increased
revenue intensity at Raffles Hospital. Volume of international patients has also
expanded due to the regional economic recovery. The higher throughput of patients
will provide economies of scale, improved operating efficiency and better margins.
Leveraging on extensive network to dominate corporate market. RMG operates the
largest network of 60 family medicine clinics in Singapore. It leverages on this extensive
network to build up a base of 5,000 corporate clients. Notable contracts include an
eight-year S$84.5m contract awarded by the Ministry of Home Affairs for general,
medical, dental, specialist outpatient and psychiatric rehabilitation services. Corporate
clients account for 65% of patient volume at its chain of clinics and 35% of patient
volume at Raffles Hospital.
Prime beneficiary of liberalisation of Medisave. Usage of Medisave has been extended
to treatment of chronic diseases such as diabetes, hypertension, high cholesterol
level and stroke at the outpatient level. The Ministry of Health estimated that S$250m
would be withdrawn annually for these outpatient treatments. The daily withdrawal
limit for Medisave claims has also been increased from S$400 to S$450 for
hospitalisation and from S$200 to S$300 for approved day surgeries.
Initiate coverage with BUY. We like RMG for the growth momentum at Raffles Hospital.
Our target price is S$2.05 based on our three-stage discounted cash flow model.
Sector
Healthcare
Bloomberg
RFMD SP
Website www.rafflesmedical.com
Exchange Rate
S$1.463/US$
52-Wk Range (S$) 1.61/0.823
52-Wk Avg Daily Vol. ('000) 485
No. of Shares (m) 515.0
Market Cap (S$m) 731.3
(US$m) 499.8
Major Shareholders (%)
Raffles Medical Hldgs P/L 40.2
Dr Loo Choon Yong 10.2
Book NTA per Share (S$) 0.37
ROE (%) 14.3
Net Cash per Share (S$) 0.22
Alternative Instruments
Nil
Results Due
1Q: Apr 1H: Jul
3Q: Oct Final: Feb
(S$)
2.00
Raffles Medical/STI (RHS)
1.50
Raffles Medical
1.00
0.50
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1.2
1.1
1.0
0.9
0.8
0.7
0.6
Market PE - STI (x)
2006 16.2
2007F 18.6
Analyst:
Jonathan Koh, CFA
(65) 6539 1026
jonathankoh@uobkayhian.com
Net EPS EV/
Year to Turnover EBITDA Profit EPS Growth PE EBITDA DPS*
31 Dec (S$m) (S$m) (S$m) (¢) (%) (x) (x) (¢)
2005 112.9 16.6 12.0 2.7 23.9 51.9 42.2 1.4
2006 134.2 22.6 15.7 3.5 27.9 40.6 30.6 2.3
2007F# 167.0 29.5 30.6 5.9 69.9 23.9 25.9 3.0
2008F 209.3 39.7 27.4 5.3 (10.4) 26.6 18.9 3.5
2009F 230.3 43.5 30.9 6.0 12.6 23.7 17.0 4.0
Consensus net profit -- FY05: S$29.2m # 2007F earnings include fair value gain of S$12.5m from a 50% stake in CapitaLand-Raffles Properties.
-- FY06: S$31.1m * Excludes special dividend of 1.36¢ for 2005 and 2006
Raffles Medical Group 1

Investment Highlights
ROOM FOR GROWTH AT RAFFLES HOSPITAL
The flagship Raffles Hospital is a tertiary hospital with licence for 380 beds, 12
operating theatres, six delivery rooms, a 20-bed intensive care unit, a 24-hour
walk-in clinic and accident & emergency department. The hospital commenced
operations on 31 Mar 01 with the transfer of seven patients from Raffles
SurgiCentre at Clemenceau Avenue. It broke even in 2002 within two years
after opening. Revenue contribution from Raffles Hospital has since expanded
at a CAGR of 22.4% over the past five years.
Building scale at Raffles Hospital. Raffles Hospital grew marginally from 100
beds in Mar 02 to 150 beds in Dec 06. Raffles Hospital has stepped up the pace
of expansion with an additional 25 beds in 1H07. Management plans to add
another 25 beds in 2H07, bringing the total to 200 beds. The recruitment of
more specialists has increased revenue intensity at Raffles Hospital. Volume of
international patients has also expanded due to the regional economic recovery.
The higher throughput of patients will provide economies of scale, improved
operating efficiency and better margins.
Positive impact from operating
leverage.
Figure 1: Raffles Hospital
Source: RMG
2 Raffles Medical Group

Figure 2: Revenue Contribution From Hospital Services
(S$m)
80
70
60
50
40
30
20
10
0
CAGR: 22.4%
2002 2003 2004 2005 2006
Source: RMG
Building up revenue intensity. Raffles Hospital offers services across 35 medical
disciplines organised into 10 specialist clinics. It aims to increase revenue intensity
by handling more complex procedures such as renal transplants, cancer
treatments and heart surgeries. The hospital has recruited more skilled
specialists in areas such as gastroenterology, endocrinology, development
paediatrics, ophthalmology and obstetrics & gynaecology so as to increase revenue
intensity.
New hiring boosts revenue
intensity.
Key revenue contributors at Raffles Hospital are Raffles Women's Centre, Raffles
Internal Medicine Centre, Raffles Cancer Centre and Raffles Heart Centre:
Raffles Women's Centre has a team of 10 specialists, making it the largest
obstetrics & gynaecology practice in Singapore. It offers a comprehensive range
of obstetrics & gynaecology services including foetal screening services, highrisk
pregnancy management and treatments for fertility such as super-ovulation
& intrauterine insemination, in-vitro fertilisation and intra cytoplasmic sperm
injection. The centre has set up four outreach clinics with fertility services to
help the growing number of patients requiring assistance for conception.
Raffles Internal Medicine Centre offers prevention, diagnosis and treatment
for a wide range of medical sub-specialties. The centre has recruited more
specialists to support higher patient throughput. It has also strengthened the
gastroenterology department to offer advanced gastro-intestinal and hepatology
(liver, gall bladder and bile duct) procedures.
Raffles Cancer Centre is affiliated to New York-based Memorial Sloan-Kettering
Cancer Centre, a renowned cancer research centre. The centre provides cancer
screening, diagnosis, radiotherapy and other treatment services. The centre
has developed genetic screening programmes, genetic counselling and genetic
risk screening packages.
Raffles Medical Group 3

Raffles Heart Centre has expanded with the recruitment of more interventional
cardiologists. The centre is seeing an increase in cases for angioplasty & stent
implantation and coronary artery bypass grafting. Raffles Hospital has also
acquired a 64-slice Computed Tomography (CT) Scanner for ultra fast imaging
for heart and coronary arteries.
Building up volume of international patients. International patients from core
markets such as Indonesia and Malaysia have increased due to economic recovery
in the region. There were contributions from new markets such as Vietnam,
Bangladesh, Myanmar, India, Mongolia and Russia. International patients from
Vietnam and Russia are the fastest-growing segments. Raffles Hospital aims to
attract middle-class patients from across Asia. 35% of hospital patients are
foreigners from over 100 countries. Raffles Hospital targets to increase
international patients to 50% of patient volume in two years.
International patients boost
revenue intensity.
Figure 3: International Patients Inflow to Singapore
('000)
450
400
350
300
250
200
150
100
50
0
CAGR: 17.7%
2001 2002 2003 2004 2005 2006
Source: Ministry of Health, Frost & Sullivan
Planning overseas expansion in China and Middle East. RMG plans to expand
regionally beyond Singapore. It will explore opportunities for co-ownership of
regional hospitals and medical centres at key cities in China such as Shanghai
and Beijing. It also plans to develop healthcare consultancy and management
services in the Middle East. Overseas expansion is targetted at well-heeled
international patients who can afford quality healthcare. Overseas facilities
provide a growing stream of referrals for Raffles Hospital and are channels for
follow-up consultations.
Exploring opportunities in
China.
4 Raffles Medical Group

LEVERAGING ON EXTENSIVE NETWORK TO DOMINATE CORPORATE
MARKET
RMG is a managed healthcare provider. It enters into contracts with corporate
clients to provide primary, specialist and hospitalisation care for their employees
at pre-agreed rates based on headcount. Corporate clients outsource their
staff healthcare needs to RMG, which controls healthcare cost and handles all
related administrative work.
Significant player in corporate market. RMG has the largest network of 60
family medicine clinics in Singapore. The company has leveraged on its
extensive network to build a base of 5,000 corporate clients. They include
Singapore Power, Singapore Airlines, DBS Bank, CapitaLand, Seagate and
KPMG. Corporate clients account for 65% of patient volume at its chain of
clinics and 35% of patient volume at Raffles Hospital. The clinics also provide
a recurrent source of referrals for Raffles Hospital.
Corporate clients provide
recurrent revenue and stable
growth.
Notable contracts include an eight-year S$84.5m contract awarded by the
Ministry of Home Affairs for the provision of general, medical, dental, specialist
outpatient and psychiatric rehabilitation services. The contract covers several
departments within the Ministry of Home Affairs, including Singapore Prison
Service, Singapore Police Force and Central Narcotics Bureau. The contract
to provide medical services at Changi International Airport has been renewed
for another five years. Existing medical centres are located at the two terminals
and cargo complex. A new medical centre will be added at Terminal 3 to
provide general practice, health screening, obstetrics & gynaecology and
aesthetics services.
Figure 4: Raffles Medical Clinics
Source: RMG
Raffles Medical Group 5

Figure 5: Revenue Contribution From Healthcare Services
(S$m)
70
60
50
40
30
20
10
0
CAGR: 2.4%
2002 2003 2004 2005 2006
Source: RMG
Strengthening network of clinics. RMG has upgraded some existing clinics into
integrated medical centres offering comprehensive services, including specialist
treatments such as aesthetics, paediatrics and gynaecology, health screening
services, laboratory services, x-ray and other diagnostic tests. To date, there are
six integrated medical centres located at OUB Centre, Changi International
Airport, Tampines Junction, Compass Point, Jurong East and Causeway Point.
Expanding scope of services at
integrated medical centres.
In Apr 06, RMG launched a traditional Chinese medicine (TCM) clinic housed
within Raffles Hospital. The clinic has since expanded into a two-unit centre
and offers acupuncture and acupressure treatments. The TCM clinic works
closely with specialist centres to provide complementary treatment for back
pain, infertility, asthma, migraine and cancer.
6 Raffles Medical Group

PRIME BENEFICIARY OF LIBERALISATION OF MEDISAVE
Benefitting from changes in government policy. The daily withdrawal limit for
Medisave claims was revised up from S$400 to S$450 for hospitalisation and
from S$200 to S$300 for approved day surgeries with effect from 1 May 07
(Appendix). Usage of Medisave will also be allowed for diagnostic scans such as
magnetic resonance imaging (MRI) and CT scans, if they form parts of outpatient
cancer treatment. This will take effect before end-07. Currently, usage of
Medisave is only allowed for payment of inpatient diagnostic scans.
The usage of Medisave is now extended to treatment of chronic diseases. Usage
of Medisave was extended to diabetes with effect from 1 Oct 06 and to
hypertension, high cholesterol level and stroke with effect from 1 Jan 07. These
changes enable more patients to seek private healthcare. The Ministry of Health
has estimated that S$250m would be withdrawn annually for these outpatient
treatments.
S$250m to be withdrawn p.a.
for outpatient treatment of
chronic diseases.
RMG is well positioned to benefit from the change in government policy as it
has the largest network of family medicine clinics in Singapore. It has
strengthened its network of clinics to handle chronic illnesses at the outpatient
level.
Raffles Medical Group 7

Valuation
RMG trades at 2007 PE of 20.2x (33.8x if we exclude fair value gain of S$12.5m
from a 50% stake in CapitaLand-Raffles Properties) and 2008 PE of 26.6x.
Healthcare providers in the region trade at an average prospective PE of 24.4x.
The rich valuation reflects quality of earnings and solid growth prospects for
the healthcare industry in Asia.
Rich valuation reflects high
quality earnings.
Target price based on DCF. Our target price for RMG is S$2.05 based on our
three-stage discounted cash flow (DCF) model. Our assumptions are as follows:
a) risk free rate at 2.8%,
b) beta of 0.8x,
c) equity risk premium at 7%,
d) WACC of 8.4%, and
e) terminal growth of 3%.
Figure 6: Valuation – Healthcare
Company Name Mkt Cap Rec Price @ Target PE (x) P/B ROE Div Yield
(US$m) 22 Oct 07 Hist. Current Forward (x) (%) (%)
Singapore
Pacific Healthcare 83.2 Not Rated 0.44 - 26.0 n.a. n.a. 2.5 10.0 1.8
Parkway Holdings 2,044.1 Not Rated 3.88 - 36.8 32.9 28.1 6.8 13.2 2.8
Raffles Medical Group 499.9 BUY 1.42 S$2.05 40.6 33.8 26.8 5.7 14.3 2.0
Thomson Medical Centre 128.7 Not Rated 0.645 - 27.7 20.8 16.5 2.4 9.1 2.8
Thailand
Bangkok Chain Hospital 255.1 Not Rated 8.45 - 19.6 17.5 15.3 3.2 17.1 3.0
Bangkok Dusit Med Service 1,425.0 BUY 37.00 Bt51.90 43.0 26.4 19.5 4.5 15.0 1.4
Bumrungrad Hospital 1,035.5 SELL 44.75 - 28.5 26.3 22.4 9.0 37.2 1.9
Malaysia
KPJ Healthcare 202.5 Not Rated 3.30 - 16.3 13.4 11.5 1.5 9.6 4.2
Average 29.8 24.4 20.0 4.5 15.7 2.5
Source: Bloomberg, UOB Kay Hian
8 Raffles Medical Group

Financials
30 years of uninterrupted growth. RMG has established an impeccable track
record since its inception in 1976. The company was incorporated and started
to promote RMG's corporate identity in 1989. Since then, revenue has
expanded at a CAGR of 20.5% over the past 15 years. This was driven by the
expansion of its network from 27 clinics in 1997 to 60 clinics in 2006. Revenue
has been boosted by contribution and growth from Raffles Hospital since 2001.
Figure 7: Revenue
(S$m)
160
140
120
100
80
60
40
20
0
CAGR: 20.5%
FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06
Source: RMG
Revenue contribution from Hospital Services grew at a CAGR of 22.4% over
the past five years and expanded from 37.1% of sales in 2002 to 54.8% in 2006.
Revenue contribution from Hospital Services exceeded Healthcare Services in
2005 when it generated sales of S$60.2m, or 53.3% of total sales.
Contribution from Hospital
Services becoming more
important.
EBITDA margin at Hospital Services increased from 8.4% in 2002 to 20.3% in
2006 due to improved operating efficiencies at Raffles Hospital. EBITDA margin
for Healthcare Services has averaged 13.2% over the last five years. The
contraction in margins for Healthcare Services in 2005 was an aberration due
to start-up losses of S$0.9m from RMG's subsidiary International Medical Insurers
(IMI). Hospital Services accounted for 66.2% of group EBITDA in 2006.
Figure 8: EBITDA Margin for Healthcare Services
(%)
16
14
12
10
8
6
4
2
0
2002 2003 2004 2005 2006
Source: RMG
Raffles Medical Group 9

Figure 9: EBITDA Margin for Hospital Services
(%)
25
20
15
10
5
0
2002 2003 2004 2005 2006
Source: RMG
Solid 2Q07 results. Revenue increased 26.3% yoy to S$41.4m. Revenue from
Hospital Services grew 33.2% yoy to S$24.2m. Raffles Hospital has benefitted
from increased patient volume driven by a wider range of specialist treatments.
There was also positive impact from the economic recovery in the region,
especially in China and India. Revenue from Healthcare Services grew 17.6%
to S$17.1m. Healthcare Services benefitted from the buoyant domestic
economy, which resulted in more hiring and more demand for quality healthcare
for employees.
EBITDA margin expanded from 16.3% in 2Q06 to 17.9% in 2Q07. The
improvement was a result of economies of scale and improved operating
efficiencies from higher patient volume for both Healthcare Services and
Hospital Services. RMG booked in a fair value gain of S$12.5m from its 50%
stake in CapitaLand-Raffles Properties. Pre-tax profit would have increased
43% yoy if we exclude the one-off fair value gain.
Figure 10: Segmental Breakdown (2Q07)
Healthcare
Services
41.4%
Hospital
Services
58.6%
Source: RMG
10 Raffles Medical Group

Full ownership of Raffles Hospital building. RMG has acquired the remaining
50% stake in CapitaLand-Raffles Properties, which owns the Raffles Hospital
building, from CapitaLand for S$66.9m. Gaining full control provides the
flexibility to improve or alter the use of various parts of the hospital building.
The acquisition is funded by a placement of 50m new shares at S$1.30 each.
25m new shares were issued to both Temasek Holdings and Qatar Investment
Authority and both investors will each own 4.9% of RMG. Raffles Hospital is
located on the fringe of the central business district and was valued at S$215m
in Jun 07.
Gaining full control of the Raffles Hospital building also provides flexibility if
management decides to move towards an asset-light strategy. RMG could
consider divesting the building to a real estate investment trust (REIT). This
would raise funds for significant expansion in China and the Middle East.
Offers attractive dividend yield. RMG has maintained a payout ratio of 100%
over the past three financial years. The high payout ratio is supported by strong
cash flow from operations. The company paid a total dividend of 4 cents for
2006, comprising an interim and final dividend of 2.5 cents and a special
dividend of 1.5 cents. This represents a yield of 2.8%.
High dividend payout ratio.
Management plans to at least maintain the interim and final dividend. The
payment of special dividend is subject to the financial performance of the
company and requirements for capex.
Figure 11: Dividend per Share
(S¢)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
FY04 FY05 FY06
Interim & Final Dividend
Special Dividend
Source: RMG
Raffles Medical Group 11

Company Background
RMG was established in 1976 with two clinics in the central business district and
has grown to become an integrated healthcare provider. It operates a network
of 60 family medicine clinics in Singapore and four in Hong Kong. It also
manages clinics at Changi International Airport in Singapore and Chek Lap
Kok International Airport in Hong Kong. RMG upgraded its Jakarta office into
an international medical centre in 2005 and has representative offices in
Bangladesh, Sri Lanka, India, Myanmar and Vietnam.
Celebrated 30th anniversary
in 2006.
RMG's flagship Raffles Hospital, a tertiary hospital with licence for 380 beds,
was opened in Mar 01. The hospital provides a full complement of specialist
medical and diagnostic services for both inpatients and outpatients. Its key
competencies include oncology, cardiology, obstetrics & gynaecology,
gastroenterology & general surgery, orthopaedic surgery, plastic & reconstructive
surgery and paediatrics. Raffles Hospital offers services across 35 medical
disciplines organised into 10 specialist clinics.
Group Practice Model provides differentiation. Doctors work in multidisciplinary
teams at RMG under its unique Group Practice Model. The model
delivers integrated and coordinated medical care that is peer reviewed and
medically audited. It harnesses the strengths of team members in various subspecialities
to work together in serving the varied needs of corporate and
individual clients. The model also institutionalises good medical practices and
professional development.
Group Practice Model promotes
sound medical practices.
RMG employs a total of 1,000 employees, including 170 medical doctors (about
60 are medical specialists). Employees receive basic salaries and variable bonuses
(or profit share). In addition, more than 300 employees are incentivised via its
employee share option scheme. The remuneration system thus encourages
long-term service.
12 Raffles Medical Group

Long-term potential in insurance business. IMI is a specialist healthcare insurer.
It converted its general insurance licence into a life insurance licence in Mar
06 after receiving approval from the Monetary Authority of Singapore. The
licence allows IMI to write long-term health insurance policies, including
portable medical health plans for individuals and group term life insurance for
corporate clients.
IMI currently accounts for less than 5% of group sales but has tremendous
long-term growth potential. It plans to expand its distribution network and
create innovative and personalised medical insurance plans. The corporate
client base has expanded after securing several group insurance contracts. The
number of members crossed the 60,000 mark in 2006.
Figure 12: Management Team
Executive Chairman
Dr Loo Choon Yong
General Manager
Business Development
Dr Prem Kumar Nair
General Manager
Management Services
Hilda Yap
Group Financial
Controller
Kimmy Goh
Raffles Medical
Clinics
Medical Director
Dr Wilson Wong
General Manager
Dr Kenneth Wu
Raffles Hospital
Medical Director
Prof Walter Tan
Deputy Medical
Director
Dr Yang Ching Yu
General Manager
Thomas Lee
Raffles Hospital
International
General Manager
Lawrence Lim
International
Medical Insurers
General Manager
Dr Yii Hee Seng
Source: RMG
Raffles Medical Group 13

Figure 13: Corporate Milestones
1976 • Partners Dr Loo Choon Yong and Dr Alfred Loh took over Teng's Clinics at Cecil Street and Maxwell House, and operated
the practice under the name Drs Teng & Partners on 1 August.
1980 • The Cecil Street clinic was relocated to Tuan Sing Tower and the name of the practice was changed to RMG, adopting its
name from Dr Loo and Dr Loh's alma mater - Raffles Institution.
1982 • RMG established its flagship clinic in the Straits Trading Building in the commercial centre Raffles Place.
1989 • Incorporated.
• Started to promote RMG's corporate identity.
1990 • RMG was appointed in June to be the exclusive medical provider for Changi International Airport, operating clinics in
Passenger Terminals 1 and 2 and the Cargo Complex.
• Raffles Denticare was established. First clinic opened at Terminal 2.
1992 • Raffles Diagnostica was set up to provide laboratory and radiology services to complement the Group's medical services.
1993 • Raffles SurgiCentre opened on 18 September at No. 182 Clemenceau Avenue as the first standalone day surgery centre in
Southeast Asia.
1994 • RMG's flagship clinic in Straits Trading Building was moved to Caltex House.
1995 • RMG opened its first overseas clinic in Hong Kong at the Lane Crawford Building on Queen's Road in December.
1996 • RMG started its managed care programme - Raffles Care - under an exempt insurance licence from the Monetary Authority
of Singapore.
1997 • RMG acquired medical group Drs Oram & Partners that provided a platform for expansion of its Hong Kong practice in
January.
• RMG became the first full-fledged healthcare provider to go public in Singapore when it got listed on SGX SESDAQ on 11
April.
1998 • RMG was appointed exclusive medical provider for Hong Kong's new Chek Lap Kok International Airport.
2000 • RMG set up first Representative Office in Jakarta.
• RMG was appointed to provide medical services to the departments under the Ministry of Home Affairs - the Singapore
Police Force, Central Narcotics Bureau and Prisons Department.
• RMG's listing was transferred to the Main Board of the Singapore Stock Exchange on 10 July.
2001 • Raffles Hospital commenced operation on 31 March. The first inpatients of Raffles Hospital were seven patients transferred
from the SurgiCentre.
• The first Raffles baby was born at 7.20pm, 19 July. She was delivered by Consultant Obstetrician Dr Joan Thong Pao Wen.
2002 • Raffles Hospital was officially opened by then Deputy Prime Minister Mr Lee Hsien Loong on 16 March.
• RMG's humanitarian arm - The Medical Foundation - was set up to serve the community.
• First open heart surgery was successfully performed in June.
• RMG achieved Group wide ISO 9001: 2000 certification in October.
• RMG's flagship clinic at Caltex House was moved to OUB Centre in December.
2003 • Raffles Japanese Clinic was set up on 15 January to serve its Japanese clientele.
• RMG was appointed to provide temperature screening at all checkpoints during the SARS period.
• Raffles Health was launched in March to develop and distribute quality personal healthcare products. Among its earliest
products was the SARS Protect kit.
• Epic separation surgery of Iranian twins Laleh and Ladan Bijani was carried out in July.
• The Korean twins Ji Hye and Sa Rang were successfully separated in July.
2004 • RMG set up Representative Office in Dhaka, Bangladesh in June.
• The first living donor renal transplant was successfully performed on a Korean businessman on 13 September.·
Acupuncture service was introduced for outpatients in November, and extended to inpatients in Apr 05.
• RMG's humanitarian arm, renamed Asian Medical Foundation, sent its first relief mission to Aceh on 26 December to assist
in the 2004 Boxing Day Asian tsunami crisis.
2005 • Raffles Hospital grew as an international patient hub with a third of the hospital's patients being foreigners, comprising
nationals from more than 100 countries.
• International Medical Insurers was issued a full insurance licence by the Monetary Authority of Singapore in November.
2006 • Raffles Chinese Medicine opened on 1 April to offer services in herbal medicine, acupressure, and acupuncture.·
Patient Liaison Office in Ho Chih Minh City in Vietnam was set up on 1 February.
• RMG commemorated its 30th anniversary on 29 July.
2007 • RMG acquired the remaining 50% stake in CapitaLand-Raffles Properties from CapitaLand for S$66.9m.
• RMG completed placement of 50m new shares at S$1.30 each. 25m new shares were issued to both Temasek Holdings and
Qatar Investment Authority, with both investors owning 4.9% of RMG each.
Source: RMG
14 Raffles Medical Group

Risk Factors
Macro economic uncertainties. Slower growth or recession in regional countries
could affect arrivals for international patients. For example, volume for
international patients coming to Singapore was negatively affected during the
Asia Financial Crisis in 1997.
Outbreak of communicable diseases. Patient volume at Raffles Hospital would
be affected by an outbreak of communicable diseases such as Avian Flu and
SARS. Interestingly, revenue generated by Raffles Hospital grew 14.7% in 2003
despite the SARS outbreak.
Escalation in cost pressures. Staff cost is the largest cost item and accounted
for 51.6% of sales in 2006. Margins would be affected if the supply of doctors
and nurses is constrained, resulting in competition between healthcare providers
to attract staff with higher pay.
Raffles Medical Group 15

Figure 14: Segmental Breakdown
Year to 31 Dec 2005 2006 2007F 2008F 2009F
Turnover (S$m)
Healthcare Services 52.6 60.7 73.0 88.2 99.2
Hospital Services 60.2 73.5 93.8 121.0 131.0
Investment Holdings 0.1 0.1 0.1 0.1 0.1
Total 112.9 134.2 166.9 209.3 230.3
(%)
Healthcare Services 46.6 45.2 43.7 42.1 43.1
Hospital Services 53.3 54.8 56.2 57.8 56.9
Investment Holdings 0.1 0.0 0.1 0.0 0.0
Total 100.0 100.0 100.0 100.0 100.0
Source: Raffles Medical, UOB Kay H ian
Figure 15: Profit & Loss
Year to 31 Dec (S$m) 2005 2006 2007F 2008F 2009F
Turnover 112.9 134.2 167.0 209.3 230.3
Other Operating Income 0.9 1.9 1.4 2.0 2.0
Inventories & Consumables Used (13.7) (16.6) (20.1) (25.1) (27.6)
Staff Costs (61.5) (69.3) (84.0) (104.6) (115.2)
Other Operating Expense (22.1) (27.7) (34.8) (41.9) (46.1)
EBITDA 16.6 22.6 29.5 39.7 43.5
Depreciation (3.1) (3.4) (3.8) (4.0) (4.0)
Interest Expense (0.1) (0.1) (1.1) (2.2) (1.8)
Associated Companies 1.4 0.9 13.1 0.0 0.0
Pre-tax Profit 14.8 20.0 37.6 33.5 37.7
Tax (2.8) (4.3) (7.0) (6.0) (6.8)
Profit After Tax 12.0 15.8 30.7 27.4 30.9
Minority Interests (0.1) (0.1) (0.0) 0.0 0.0
Net Profit 12.0 15.7 30.6 27.4 30.9
Source: Raffles Medical, UOB Kay H ian
16 Raffles Medical Group

Figure 16: Balance Sheet
Year to 31 Dec (S$m) 2005 2006 2007F 2008F 2009F
Fixed Assets 21.4 20.2 231.4 230.4 229.4
Associated Companies 53.0 54.0 0.0 0.0 0.0
Intangibles 0.3 0.2 0.2 0.2 0.2
Other Long-Term Assets 0.9 1.1 1.2 1.3 1.4
Current Assets
Stocks 2.9 3.4 4.6 5.7 6.3
Trade Debtors 9.6 13.6 16.0 20.1 22.1
Bank Deposits & Cash 35.1 41.9 8.9 22.8 16.1
Investments 13.0 14.3 12.0 12.0 12.0
Others 2.7 3.1 3.4 3.8 4.2
Total 63.3 76.4 44.9 64.3 60.7
Total Assets 138.9 151.8 277.7 296.3 291.7
Current Liabilities
Trade Creditors 22.5 27.3 32.0 40.1 44.2
Borrowings 2.3 2.0 2.0 2.0 2.0
Others 5.7 8.6 9.5 10.4 11.5
Total 30.5 37.9 43.5 52.6 57.6
Long-Term Loans 0.0 0.0 40.0 40.0 20.0
Other Long-Term Liabilities 0.7 0.7 0.8 0.9 1.0
Capital & Reserves
Share Capital 40.0 101.1 166.1 166.1 166.1
Share Premium & Capital Reserves 57.3 1.7 1.7 1.7 1.7
Revenue & General Reserves 10.2 10.1 25.3 34.7 45.0
Shareholders' Funds 107.5 112.9 193.0 202.5 212.8
Minority Interests 0.2 0.3 0.3 0.3 0.3
Total Equity & Liabilities 138.9 151.8 277.7 296.3 291.7
Source: Raffles Medical, UOB Kay H ian
Raffles Medical Group 17

Figure 17: Cash Flow
Year to 31 Dec (S$m) 2005 2006 2007F 2008F 2009F
Operating 15.6 19.7 29.4 34.9 37.0
Pre-tax Profit 14.8 20.0 37.6 33.5 37.7
Depreciation 3.1 3.4 3.8 4.0 4.0
Working Capital Changes 0.9 0.7 1.2 2.9 1.4
Income Taxes Paid (2.8) (4.3) (7.0) (6.0) (6.8)
Others (0.4) (0.2) (6.2) 0.6 0.6
Investing (7.9) (1.9) (69.9) (3.0) (3.0)
Capex (5.8) (2.3) (3.0) (3.0) (3.0)
Acquisitions of Subsidaries/Associates 0.0 0.0 (66.9) 0.0 0.0
Sale of Fixed Assets 0.6 0.0 0.0 0.0 0.0
Others (2.8) 0.4 0.0 0.0 0.0
Financing (5.0) (10.7) 7.6 (18.0) (40.6)
Share Issue 3.0 4.8 65.0 0.0 0.0
Proceeds from Borrowings 0.3 (0.4) (42.0) 0.0 (20.0)
Dividend Paid (8.0) (15.5) (15.5) (18.0) (20.6)
Others (0.2) 0.3 0.0 0.0 0.0
Net Increase/Decrease 2.7 7.1 (32.9) 13.9 (6.6)
Beginning Cash & Equivalent 32.0 34.8 41.8 8.9 22.8
Ending Cash & Equivalent 34.8 41.8 8.9 22.8 16.1
Source: Raffles Medical, UOB Kay H ian
Figure 18: Ratios
Year to 31 Dec (%) 2005 2006 2007F 2008F 2009F
Growth
Turnover 11.3 18.9 24.4 25.3 10.1
EBITDA 15.6 36.4 30.5 34.6 9.5
Pre-tax Profit 18.9 35.5 87.7 (11.1) 12.6
Net Profit 26.1 31.4 94.9 (10.4) 12.6
EPS 23.8 28.1 101.0 (24.3) 12.6
Profitability
EBIDTA Margin 14.7 16.8 17.7 19.0 18.9
Pre-tax Margin 13.1 14.9 22.5 16.0 16.4
Net Margin 10.6 11.7 18.3 13.1 13.4
ROA 9.0 10.9 14.3 9.6 10.5
ROE 11.5 14.3 20.0 13.9 14.9
Leverage
Total Debt/Total Assets 1.7 1.3 15.1 14.2 7.5
Total Debt/Equity 2.2 1.8 21.8 20.7 10.3
Net Cash(Debt)/Equity 30.5 35.4 (17.2) (9.5) (2.8)
Interest Cover (x) 183.7 184.9 33.8 16.2 22.4
Source: Raffles Medical, UOB Kay H ian
18 Raffles Medical Group

Appendix
MEDISAVE WITHDRAWAL LIMITS
TYPES OF TREATMENTS
For Inpatient Treatment
WITHDRAWAL LIMITS
Medical/surgical inpatient cases
Approved day surgeries
Psychiatric treatment
Stay in approved community hospitals
Stay in approved convalescent hospitals
Stay in approved hospices
Day care at Senior Citizens in Health Care Centres
S$450 per day + Surgical limits according to the Table of Operations
(as of 1 May 07).
S$300 per day + Surgical limits according to the Table of Operations
(as of 1 May 07).
S$150 per day up to $5,000 a year
S$150 per day up to $3,500 a year
S$50 per day up to $3,000 a year
S$160 per day for approved inpatient medical treatment
S$20 per day up to $1,500 a year
For Outpatient Treatment
Hepatitis B Vaccination
Outpatient treatments of approved chronic diseases (Diabetes,
Hypertension, Lipids Disorders, Stroke)
Assisted conception procedures
Renal dialysis treatment
Radiotherapy
• External Radiotherapy
• Brachytherapy with external radiotherapy
• Brachytherapy without external radiotherapy
• Superficial X-ray
• Stereotactic radiotherapy
Chemotherapy(includes analgesic medication and suppressive
treatments such as neuroendocrine and nuclear medicine
treatments)
HIV anti-retroviral drugs(includes drugs used to treat opportunistic
infections)
Thalassaemia treatment(Desferral drug and blood transfusion)
Hyperbaric Oxygen Therapy
Outpatient Intravenous Antibiotic Treatment
Rental of devices for Long-term Oxygen Therapy and Infant
Continuous Positive Airway Pressure Therapy
Immuno-Suppressant Drugs such as Cyclosporin and Tacrolimus
• Below 12 years old - S$25
• Between 12 to 19 years old - S$35
• 19 years old and above - S$50
S$300 per year per Medisave account
Use of Medisave up to 3 treatment cycles per patient (only
patient's and spouse's Medisave may be used). For Assisted
Conception Procedures' treatments received on or after 1 Aug 04,
the withdrawal limits are:
• 1st withdrawal - S$6,000
• 2nd withdrawal - S$5,000
• 3rd withdrawal - S$4,000
S$450 per month (Only patient's Medisave may be used. For
patients aged 18 and below, parents' Medisave may be used.)
• S$80 per treatment
• S$300 per treatment
• S$360 per treatment
• S$30 per treatment
• S$2,800 per treatment
S$300 for 7-day treatment cycle
S$1,200 for 21/28-day treatment cycle
S$550 per month (Only patient's Medisave may be used. For
patients aged 18 and below, the parent's Medisave may be used.)
S$350 per month
S$100 per treatment
S$600 per weekly cycle, up to S$2,400 a year
S$75 per month
S$300 per month
Source: Ministry of Health
Raffles Medical Group 19

As of 23 October 2007, the analyst and his / her immediate family do not hold positions in the securities
recommended in this report.
We have based this document on information obtained from sources we believe to be reliable, but we do not
make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or
correctness. Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are
subject to change without notice. Any recommendation contained in this document does not have regard to the
specific investment objectives, financial situation and the particular needs of any specific addressee. This document
is for the information of the addressee only and is not to be taken as substitution for the exercise of judgement by
the addressee. This document is not and should not be construed as an offer or a solicitation of an offer to
purchase or subscribe or sell any securities. UOB Kay Hian and its affiliates, their Directors, officers and/or
employees may own or have positions in any securities mentioned herein or any securities related thereto and may
from time to time add to or dispose of any such securities. UOB Kay Hian and its affiliates may act as market
maker or have assumed an underwriting position in the securities of companies discussed herein (or investments
related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or
seek to perform investment banking or underwriting services for or relating to those companies.
UOB Kay Hian (U.K.) Limited, a UOB Kay Hian subsidiary which distributes UOB Kay Hian research for only
institutional clients, is an authorised person in the meaning of the Financial Services and Markets Act 2000 and is
regulated by The Securities and Futures Authority.
In the United States of America, this research report is being distributed by UOB Kay Hian (U.S.) Inc
("UOBKHUS") which accepts responsibility for the contents. UOBKHUS is a broker-dealer registered with the
U.S. Securities and Exchange Commission and is an affiliate company of UOBKH. Any U.S. person receiving this
report who wishes to effect transactions in any securities referred to herein should contact UOBKHUS, not its
affiliate. The information herein has been obtained from, and any opinions herein are based upon sources believed
reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. All
opinions and estimates herein reflect our judgement on the date of this report and are subject to change without
notice. This report is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities
referred to herein. From time to time, the firm preparing this report or its affiliates or the principals or employees
of such firm or its affiliates may have a position in the securities referred to herein or hold options, warrants or
rights with respect thereto or other securities of such issuers and may make a market or otherwise act as principal
in transactions in any of these securities. Any such non-U.S. persons may have purchased securities referred to
herein for their own account in advance of release of this report. Further information on the securities referred to
herein may be obtained from UOBKHUS upon request.
UOB Kay Hian Research Pte Ltd,
80 Raffles Place, #30-01 UOB Plaza 1, Singapore 048624
Tel: (65) 6535 6868, Fax: (65) 6534 3243, Telex: RS 24085, RS 26128
http://research.uobkayhian.com
MICA (P) 017/05/2007
RCB Regn. No. 198700235E