Raffles Medical delivered results for its June quarter, which arrived in line with our estimates. Revenues were up 7% YoY, while earnings jumped 14% YoY to S$8.8 mn. Management declared a S1 ct interim dividend, similar to the previous year.

12% YoY revenue growth in the healthcare segment, and a 5% YoY improvement in its hospital operations, suggests underlying demand across the sector remains relatively resilient to macro uncertainties, including the H1N1 pandemic. Operating margins were at 20% during the quarter, up from 19% in 1Q09 and a year ago, due to some extent of operational efficiency gains.

The results did not yield surprises, and with the first six months having met 49% and 47% of our full-year revenue and earnings estimates, respectively, we have kept our forecasts largely intact.

Resilient margins, strong free cash flows and a growing cash hoard (S$27.5 mn net cash at end-June 2009) continue to reinforce our positive view on the stock, which currently trades at about one standard deviation below its five-year mean. We see 56% upside to our DCF-based S$1.65 target price, and maintain OUTPERFORM.