Singapore Healthcare Research 2011

8 January 2008 Asia Pacific/Singapore Equity Research Healthcare Equipment & Services

Singapore Healthcare Sector
Research Analysts Su Tye Chua 65 6212 3014 sutye.chua@credit-suisse.com Cher Ying Poh 65 6212 3098 cherying.poh@credit-suisse.com

INITIATION

Strong growth diagnosis
Singapore’s private healthcare operators look set to witness a period of robust growth, as they continue to capture a greater share of healthcare spending, driven by a demographic shift, rising income levels, an influx of medical travellers and ongoing reforms in Singapore’s healthcare financing system. We initiate coverage of Parkway and Raffles Medical, both with OUTPERFORM ratings. ■ Shot in the arm. We believe that the private sector’s share of healthcare spending will increase significantly in the medium term, driven by: 1) changing demographics, 2) rising affluence, 3) an increase in medical tourism and 4) ongoing reforms to Singapore’s healthcare financing system. In our view, current valuations have not factored in the growth prospects for Singapore’s private healthcare operators, driven by the population’s healthcare needs over the longer term.

■ Asia’s healthcare demand proxy. Parkway is Asia’s largest private
healthcare operator, with Singapore and Malaysia as its key growth drivers. We favour the company’s expanding regional footprint, and view its recently established REIT as an opportune vehicle for asset monetisation over the longer term. We initiate coverage of Parkway with an OUTPERFORM rating and a 12-month target price of S$4.80, based on a sum-of-the-parts valuation, implying 25% potential upside.

■ Operating room leverage. As an operator of the largest network of
outpatient clinics, a potential feed for referrals and an under-utilised but high quality hospital asset, we believe Raffles Medical is best positioned to benefit from a potential structural supply constraint in bed capacity over the medium term, as well as increasing patient volume-driven by... [continues]

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