TL;DR Revenue growth has slowed down due to saturated private healthcare industry in Singapore. Growth in China have not reached their earnings potential yet, but such potential could be reached in the future. Business Profile Raffles Medical is quite famous in Singapore, being recognised as one of the premium healthcare services in Singapore. They own and operates a network of family medical clinics, a tertiary care hospital, insurance services and a consumer healthcare division. The clinic was first founded in 1976. But today, they serve more than one million patients today and over 6,500 corporate clients. Financials Income Statement YOY financials look quite similar, with net profit increasing by 3%. This is because YOY revenue and expenditures hardly changed much. Revenue seems to be fairly split between hospital and healthcare services. Over the past few years, revenue have not grown much due to saturation in the Singapore market. This should not be surprising, since Singapore has a small population, and healthcare is not a consumer product which can be consumed repeatedly. (you won’t visit the doctor for nothing) Hence, overall market size revenue for Singapore can’t grow much. Finance expenses did experience a significant proportionate increase YOY due to more debt being taken on. As the firm expands into China, more revenue growth can be expected. Balance Sheet Current ratio is slightly more than 1, which shows that short-term liquidity isn’t very strong. Based on a leverage ratio (Debt/Equity) of 0.14, the business seems properly leveraged, with potential for taking on more debt to fund overseas expansion at a lower cost of debt. The Net Deb/EBITDA ratio is also extremely low, which reinforces the well-leverage position. Interest coverage ratio (EBITDA/finance costs) is also very low at almost 100X. Cashflow Cashflow from operating activities actually improved due to better working capital management. Cashflow from operating activities is driven by high net profit and profitability. Cashflow from investing activities were due to lesser payment for investment properties. However, cashflow used for capital expenditures and investments overseas are almost equal due to cashflow not being strong yet from overseas properties. Cashflow from financing activities experienced both huge inflows and outflows due to new debt being taken on and older debt being repaid. Overall Free Cashflow is actually negative due to huge investment activities overseas. However, these investments should pay-off, such that future free cashflow should be strong. Dividend payout ratio is about 22%. However, due to large expansionary measures and a negative free cashflow, dividends paid out may not be able to be sustained in the long run. Growth Potential China Expansion With greater expansion in China, there could be a strong potential for earnings to rise over the years. China has one of the fastest growing middle-class populations in the world. As such, demand for private health-care has been rising fast. Additionally, the standard of service should be similar to that of Singapore, since the doctors and staff will be trained in Singapore. Stable Core Business With a stable operating cashflow of more than $70m a year, this shows that the firm generates healthy cashflow to run operations. Moreover, their business in Singapore can be considered mature, and should not be disrupted in the near future. I also believe that they are the market leader, and have quite a defensible market position over the rest. Risks Staff costs Staff costs account for close to half of the group's revenue. Shortages in doctors and skilled allied healthcare workers could result in higher staff costs that can put downward pressure on earnings. Training costs for doctors in China could also be higher, especially due to cultural differences that might exist. Economic Conditions A potential economic downturn could affect revenue more significantly since Raffles Medical is considered more of a premium service. Clients may choose to patronise public hospitals or cheaper clinics if Singapore is especially hit with a recession.