Raffles Medical Group - DBS Research 2020-04-29: Front Liners Battling On

RAFFLES MEDICAL GROUP LTD (SGX:BSL)

Raffles Medical Group - Front Liners Battling On

Raffles Medical's 1Q20 net profit fell 45% y-o-y as China operations were impacted by the COVID-19 outbreak.
Revenue and EBITDA fell 0.2% y-o-y and 13% y-o-y respectively.
While China slowly recovers, we expect Singapore operations to be impacted in 2Q20 due to the circuit breaker and travel restrictions.
Maintain HOLD; Target Price lowered to S$0.96.

Raffles Medical (SGX:BSL)'s 1Q20 PAT fell 45% y-o-y to S$7.5m, largely dragged by China Healthcare Division (Raffles Hospital Chongqing, Raffles China Clinics and Raffles Medical Hong Kong) which was impacted by the COVID-19 pandemic in China.
PAT (ex-China) fell 5% y-o-y to S$15.1m.
Revenue and EBITDA declined 0.2% y-o-y and 12.7% y-o-y.
On q-o-q basis, revenue fell 6% while EBITDA and PAT fell 37% and 61% respectively.

In China, some clinics were instructed by the local authorities to close during the lockdown, while Raffles Hospital Chongqing (RHC) was operating on a significantly smaller patient load. As China slowly recovers, clinics in Beijing, Nanjing and Shanghai have reopened and walk-in patients are slowly returning to RHC and other clinics.
The opening of Raffles Hospital Shanghai is likely to be delayed to end-2Q20 or 2H20. Management will review the situation in Shanghai and commence operations when Shanghai returns to normalcy.
In Singapore, foreign patients are prohibited to enter the country following the travel bans which intensified from March 2020 onwards. Medical tourism comprises approximately 20-30% of Raffles Medical’s patient volume.
With the movement restrictions in place, Raffles Medical has continued to serve its patients through telemedicine applications and delivery of medications, where appropriate.
In Singapore, Raffles Medical’s staff are performing temperature screening duties at the airport and some clinical staff have been redeployed to treat foreign workers as well as perform swab tests to check for the COVID-19 virus.
Raffles Medical has also extended the Emergency Care Collaboration with the Ministry of Health to take in more subsidised patients from the public hospitals.
Raffles Medical continues to manage costs during these challenging times.

We maintain our HOLD rating but lower our Target Price to S$0.96 from S$1.10. We lowered our FY20F / FY21F estimates by 5% to 8% to factor in a deeper impact from the COVID-19 situation. Following the implementation of circuit breaker, which was subsequently extended, we expect Singapore operations will be impacted in 2Q20 especially medical tourism and delays in elective procedures.
See Raffles Medical Share Price; Raffles Medical Target Price; Raffles Medical Analyst Reports; Raffles Medical Dividend History; Raffles Medical Announcements; Raffles Medical Latest News.
Raffles Medical is currently trading at 21x FY20F EV/EBITDA and 31x FY20F PE, close to its historical averages.

COVID-19 pandemic contained with travel and movement restrictions lifted earlier than expected,
Better-than-expected ramp-up of new projects / integration process,
Stronger-than-expected recovery from the COVID-10 pandemic,
Further accretive /or JVs/strategic alliances.

Rachel Lih Rui TAN DBS Group Research | Andy SIM CFA DBS Research | https://www.dbsvickers.com/ 2020-04-29

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.96 DOWN 1.100