Thursday, September 26, 2013

OCBC Report 27 Sep 13

Raffles Medical Group: Looking for overseas opportunities
Raffles Medical Group (RMG) recently announced that it has entered into a framework agreement to collaborate on the proposed development of an integrated international hospital with more than 300 beds in Shanghai, China. Negotiations on the finalisation of terms will likely take place over a timeframe of six months to a year, while relevant regulatory approval is also required. Recall that RMG is also in the process of exploring an integrated international hospital collaboration in Shenzhen, China. Should these negotiations be successful, it would allow RMG to expand its operations overseas. We are positive on RMG’s decision to explore business expansion opportunities in China given the immense growth prospects, although regulatory uncertainties would likely be the largest risk, in our view. We roll forward our valuations on RMG to 29x FY14F EPS, which consequently bumps up our fair value estimate from S$3.42 to S$3.61. Reiterate BUY. (Wong Teck Ching Andy)

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Hutchison Port Holdings Trust: Refinancing an important boost
According to Dow Jones, Hutchison Port Holdings Trust (HPHT) has secured a US$3.6b refinancing loan which comprises three tranches – a US$1b one-year loan, a US$1.6b three-year loan and a US$1b five-year loan. The one-year tranche is at an interest rate of 0.6% above Libor, while the three-year and five-year tranches are 1.1% and 1.4% above Libor respectively. On a blended basis, we estimate that the interest rate cost for this loan is ~1.5%, dramatically lower than the 2.5% rate which management had previously guided. Updating our model to reflect the lower future interest expense, we raise our DDM-based FV to US$0.84 from US$0.76 and maintain a BUYrating on HPHT. We estimate that HPHT is currently trading at an attractive FY14F dividend yield of 7.9%. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

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