Raffles Medical Group could lose $14m in 2018

It will incur startup losses from its new hospitals in China.

Raffles Medical Group's (RMG) short-term losses could reach more than $14m in 2018 due to its new hospital Raffles Chongqing, UOB Kay Hian (UOBKH) said.

According to UOBKH, RMG could also have startup losses from the opening of Raffles Shanghai in 2019.

However, the loss is minimal as compared to when IHH Healthcare Berhad opened Gleneagles Hong Kong (GHK) in one go, which incurred losses of $66m in June 2016 to June 2017.

UOBKH analyst Andrew Chow said, "For RMG, the group will open Raffles Chongqing and Shanghai progressively in phases, to match revenue growth with costs and contain upfront losses."

Raffles Chongqing will be opened progressively in phases, where approximately 150-180 beds will be initially opened and capacity would be ramped up as demand picks up.

Doctor recruitment is expected to start on 2018, where around 12 specialists will be turned into medical leaders. RMG expects to get 50% of its doctors from China.

Here's more from UOBKH:

Foreign patient volume continues to be relatively weak, where we understand that RMG may have seen a low-single-digit decline in the number of foreign patients in 2Q17. Despite this trend, overall patient load will continue to be well-supported by growth in local patients, especially given the favourable demographic trends such as rising affluence and ageing population.

Furthermore, we believe the group is stepping up efforts to hire more specialist doctors in order to enhance centres of excellence, which will help to attract medical tourists looking for more premium and quality services.