Raffles Medical Group - DBS Research 2020-07-28: Local Demand On The Mend

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

Raffles Medical Group - Local Demand On The Mend

  • Raffles Medical's 1H20 results impacted by COVID-19 but this was partially offset by government support.
  • Local patient volumes have returned close to pre-COVID levels; foreign patients remained impacted until border restrictions are lifted.
  • Declared interim dividend of 0.5 Scts, flat y-o-y.



Raffles Medical's 1H20 results impacted by COVID-19 but this was partially offset by government support schemes.

  • Raffles Medical (SGX:BSL)’s 1H20 PATMI fell 38% y-o-y to S$17m; below our FY20F estimate, mainly due to impact from COVID-19 (in both Singapore and China), but this was partially offset by the Job Support Scheme, wage credit and property tax rebate of S$15m, and COVID-19-related activities such as telemedicine, air-border screening and swabbing of foreign workers, and medical care for the government’s Changi Exhibition Centre-Community Care Facility (CEC-CCF) for COVID-19 positive cases.
  • 1H20 PAT fell 42% y-o-y to S$16m. Excluding the China Healthcare Division, PAT fell 3% y-o-y to S$31m.
  • Raffles Medical's 1H20 revenue fell 5% y-o-y to S$241m mainly from decline in hospital services (-15% y-o-y) as most elective surgeries were deferred due to COVID-19 while healthcare services grew 7% y-o-y.
  • EBITDA fell 14% y-o-y while EBITDA margins fell to 17% from 19% in 1H20.
  • Similarly, 2Q20 revenue fell 11% while EBITDA and PAT fell 15% and 38% respectively.
  • On a q-o-q basis, revenue fell 11% while EBITDA and PAT grew 3% and 17%, respectively, partially cushioned by government support schemes as mentioned above.
  • We note that the 2Q20 loss from the China Healthcare Division has fallen 3.8% q-o-q.
  • Raffles Medical declared an interim dividend of 0.5 Scts, flat y-o-y.


Key updates


Operations have resumed with local patient volumes returning close to pre-COVID-19 levels.

  • In Singapore, Raffles Medical has resumed operations post the re-opening of the economy in June. Raffles continued to support the government’s various COVID-19 initiatives and has obtained the MOH licence on Molecular Microbiology services for COVID-19 polymerase chain reaction and serology testing.
  • Local patients have progressively recovered post the re-opening of economy with volumes returning close to pre- COVID-19 levels, according to management.
  • However, foreign patients remained impacted as borders are still closed. Medical tourism comprises approximately 20% to 30% of revenue pre-COVID-19.
  • In China, all clinics have resumed operations post re-opening except Shenzhen and Beijing medical centres that are undergoing renovation. The medical centre in Beijing is expected to open in 2H20.
  • Similarly, local patients are progressively returning to the clinics, but some of the expat community (which contributes a significant part of the volume) may not have returned to the country.

Actual commencement date of RafflesHospital Shanghai has yet to be determined but management hopes to open it by this year, in line with to its plan.

  • The fitting-out works and recruitment for RafflesHospital Shanghai are in progress, however the date of commencement has yet to be determined and is dependent on when Shanghai returns to normalcy.
  • However, management hopes to open the hospital by this year, in tandem with its plan.


Maintain HOLD rating for Raffles Medical; Target Price of S$0.95.

  • We maintain our HOLD rating on Raffles Medical but nudge down our Target Price to S$0.95 from S$0.96. We trim our FY20F estimate further by 19% given the delayed recovery of the China Healthcare Division in 2Q20 and medical tourism as borders remained closed.
  • We believe the stock that currently trades at 21x forward EV/EBITDA and 32x forward PE, above its historical averages, has priced in some recovery of local patient volumes post re-opening but a full recovery will likely depend on when foreign patients can return when the border restrictions are lifted.
  • See Raffles Medical Share PriceRaffles Medical Target PriceRaffles Medical Analyst ReportsRaffles Medical Dividend HistoryRaffles Medical AnnouncementsRaffles Medical Latest News
  • Potential re-rating catalysts are:
    1. COVID-19 pandemic contained with travel and movement restrictions lifted earlier than expected,
    2. better-than-expected ramp-up of new projects / integration process,
    3. stronger-than-expected recovery from the COVID-10 pandemic, and
    4. further accertive acquisitions and/or JVs/strategic alliances.





Rachel Lih Rui TAN DBS Group Research | Andy SIM CFA DBS Research | https://www.dbsvickers.com/ 2020-07-28
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.95 DOWN 0.960



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