Raffles Medical Group - Maybank Kim Eng 2020-04-29: Looking Beyond COVID-19

RAFFLES MEDICAL GROUP LTD (SGX:BSL) | SGinvestors.io RAFFLES MEDICAL GROUP LTD (SGX:BSL)

Raffles Medical Group - Looking Beyond COVID-19


Upside attractive despite weak 1Q20; Upgrade to BUY

  • Raffles Medical (SGX:BSL)'s 1Q20 net profit of SGD7.5m (-45.4% y-o-y) accounted for only 14% of our FY20E. Excluding the impact of Covid-19 on China operations, net profit would have been SGD15.1m (-5.1% y-o-y), or 25% of our FY20E.
  • We cut FY20-22E net profit by 10-25% and trim DCF Target Price to SGD0.99 (WACC: 9%, LTG: 3%) to factor in the latest update.
  • Given a 13% YTD Raffles Medical's share price correction, strong balance sheet, and that operating metrics should improve upon the easing of COVID-19 restrictions, we upgrade Raffles Medical to BUY from HOLD.



COVID-19 disruptions weighed on China operations

  • Raffles Medical's 1Q20 revenue was flattish (-0.3% y-o-y) at SGD128m. Some of Raffles Medical's China clinics were instructed by authorities to close, while Raffles Hospital Chongqing (RHCQ) had to operate with a significantly lower patient load due to movement restrictions.
  • We believe that sticky costs despite reduced China contributions drove EBITDA down by 12.7% to SGD20.6m. However, as China begins its recovery, Raffles Medical is noting a return of walk-in patients.


Balance sheet still strong

  • Since late-Mar, Singapore hospitals, including Raffles Hospital, have been advised by the government to not accept inbound foreign patients. We believe the adverse impact of this may be partially offset by the government’s co-funding of local employees’ wages from the Solidarity and Resilience Budgets. Balance sheet remains strong with net gearing of 3%.
  • Raffles Medical has ~SGD200m of unutilised bank facilities available.


Value emerging for long-term investors






Lai Gene Lih CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-04-29
SGX Stock Analyst Report BUY UPGRADE HOLD 0.99 DOWN 1.060



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