Executive Summary

Raffles Medical Group (SGX: BSL) and Thomson Medical Group (SGX: A50) are two well-known Singapore-listed healthcare companies whose share prices have risen in the past year but remain largely flat over a longer five-year horizon. Despite strong domestic franchises, both stocks have underperformed the broader market over time, raising questions about whether their overseas expansion strategies have created or diluted shareholder value.

This article examines how overseas hospital-led expansion has reshaped the earnings profiles, risk characteristics, and market perception of these two healthcare groups. It explores why revenue growth abroad has not translated into commensurate profit growth, why hospital expansion carries structural challenges, and why investors continue to apply a valuation discount. The analysis also contrasts hospital expansion with clinic-led international growth models to clarify what types of healthcare expansion the market tends to reward.

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Long-Term Underperformance and the Overseas Expansion Question

Over the past year, both Raffles Medical Group and Thomson Medical Group have delivered share price gains of roughly 20–30%. However, when viewed over a five-year period, their performance has been largely stagnant and has lagged the Straits Times Index as well as other defensive and income-oriented stocks.

This divergence between short-term recovery and long-term underperformance points to a deeper structural issue. In both cases, the turning point coincided with strategic overseas expansion that initially appeared logical and growth-oriented. Rather than driving a sustained re-rating, these moves introduced uncertainty around earnings visibility, capital efficiency, and risk.

The central question for investors is whether this long period of underperformance reflects temporary execution lag—or whether the market is rationally discounting the structural risks introduced by hospital-led overseas expansion.

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Raffles Medical Group: Revenue Growth Abroad, Profits Still Anchored in Singapore

Raffles Medical Group is widely regarded as one of Singapore’s leading private healthcare providers. Its domestic operations are mature, well-established, and consistently profitable, forming the core earnings engine of the group.

In recent years, Raffles Medical has reported annual group revenue of approximately S$750 million, with net profit attributable to shareholders around S$60 million. These figures reflect a stable, defensive healthcare business. However, the geographic source of those profits is critical. The majority of group earnings continue to be generated in Singapore.

Overseas operations—particularly in China—have grown in revenue contribution following substantial investment in full-scale hospitals in major cities such as Shanghai, Beijing, and Chongqing. From a top-line perspective, this strategy has delivered measurable growth. China now accounts for a meaningful share of group revenue.

The challenge lies in profitability. Management has consistently indicated that several of these China hospitals remain loss-making at the operating level. This distinction is crucial: revenue growth does not equate to value creation when it is accompanied by sustained operating losses and heavy capital requirements.

As a result, group profitability remains anchored by Singapore operations, while overseas expansion continues to dilute near-term returns on capital. Investors are therefore being asked to value Raffles Medical not only on its current earnings, but on the uncertain future profitability of its overseas hospitals—an outcome with long timelines and limited visibility.

This dynamic helps explain why, despite operational strength at home, Raffles Medical’s share price has struggled to deliver sustained outperformance. Markets tend to apply caution when earnings depend on long-dated outcomes that are difficult to forecast.

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Thomson Medical Group: When Expansion Reshapes the Risk Profile

Thomson Medical Group presents a more cautionary case. Prior to overseas expansion, Thomson was largely viewed as a stable Singapore healthcare operator, particularly strong in women’s and children’s services. While growth was modest, earnings were relatively predictable.

This profile changed materially following the group’s overseas acquisition of FV Hospital in Vietnam in 2023. The transaction significantly increased scale but also altered the financial structure of the group. Debt levels rose, interest expenses increased, depreciation charges expanded, and goodwill was added to the balance sheet based on assumptions of future growth.

Subsequent performance tested those assumptions. The group slipped into losses, with reported group losses approaching S$50 million in its most challenging year in FY2025. A substantial goodwill impairment related to the Vietnam operations, combined with higher financing costs, drove this outcome.

Although impairments are non-cash items, they are economically meaningful. They represent a reassessment of expected returns and an acknowledgment that the overseas asset was not generating value as initially projected.

For investors, this marked a structural shift. Overseas expansion did not merely delay earnings recovery—it transformed Thomson Medical into a more leveraged and volatile business with reduced earnings predictability. This change in risk profile continues to weigh on valuation, even after partial share price recovery.

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A Shared Structural Challenge: Why Hospital Expansion Is Difficult to Monetise

While company-specific execution matters, both cases point to a broader structural issue. Raffles Medical and Thomson Medical expanded overseas primarily through hospitals rather than clinics.

Hospitals are among the most capital-intensive healthcare assets. They require substantial upfront investment, operate under complex regulatory regimes, face staffing and pricing constraints, and often experience long ramp-up periods before reaching optimal utilisation. Once capital is deployed, flexibility to exit or resize is limited.

From an investment perspective, this makes outcomes difficult to forecast. Revenue growth may precede profitability by many years, and even well-executed strategies remain vulnerable to regulatory, operational, and market-specific shocks. As a result, hospital-led expansion is often treated by the market as a long-dated option rather than a near-term growth driver—and is therefore discounted until profitability is clearly demonstrated.

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Why Clinic-Based Expansion Is Viewed Differently

The market’s caution toward hospital expansion becomes clearer when contrasted with clinic-based overseas growth models.

Clinic expansion is typically less capital-intensive and more modular. Capital is deployed incrementally, returns can be assessed site by site, and underperforming locations can be exited with manageable downside. This structure provides management with flexibility and investors with clearer visibility on returns.

Examples include ISEC Healthcare, which has expanded clinics across Singapore, Malaysia, and Myanmar in a measured manner, and Q&M Dental Group, whose overseas expansion introduced operational challenges but did not fundamentally alter the group’s balance sheet or risk profile.

This contrast explains why investors are generally more comfortable with clinic-led international expansion and more sceptical of hospital-driven strategies. The difference lies not in geography, but in capital intensity, reversibility, and earnings visibility.

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Conclusion

Raffles Medical Group and Thomson Medical Group illustrate how overseas expansion can reshape the investment profile of otherwise defensive healthcare businesses. In both cases, hospital-led expansion has increased revenue but introduced long-dated uncertainty around profitability, capital efficiency, and risk.

The market’s persistent caution reflects these structural realities rather than short-term sentiment. Until overseas hospitals demonstrate consistent and meaningful earnings contribution, valuation discounts are likely to persist.

For investors, the key lesson is that how a healthcare company expands matters more than where it expands. Hospital assets demand patience, capital, and tolerance for uncertainty, while clinic-based models offer greater flexibility and clearer economics. Understanding this distinction is essential when assessing long-term shareholder value in healthcare expansion strategies.

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