YTD private hospital admissions declined 1.8% YoY. The decline in admissions reflects a slowdown in private healthcare and a migration toward public healthcare. RMG's patient base has shown resilience in 1Q09 with growth in its foreign patient base. However, continued economic slowdown could put pressure on the private healthcare sector. The stock has a yield of 2.8% and trades at a PE of 14.6x FY09E, a slight premium to its regional peers which trade at 13.2x. Hold.

1Q09 results showed that growth came from an increase in volumes at its healthcare (+11% YoY) and hospital divisions (+5% YoY). Outperformance came from the increase in the number of foreign patients, which rose 8% YoY, and recent key measures in the government budget through savings from Job Credit.

Management continues to see an increase in foreign patients helped by a diverse mix of foreign patients and higher operating margins due to increased operating leverage, savings from Job Credit and improved bulk purchasing. We raise our earnings estimates by 6-9% in FY09-11E to factor in higher patient volumes (from a 5.5% decline to flat) and margin assumptions.

Based on our revised earnings forecasts, we have raised our TP to S$0.68 from S$0.62 based on our DCF valuation using a discount rate of 9.0% with a terminal growth rate of 1.0%. Upside risks are greater operating leverage, an accretive acquisition, and a rebound of regional economies. Downside risks are higher operating costs and a drop in the number of foreign patients.