Raffles Medical Group - Maybank Kim Eng 2021-02-22: Eyes Normalisation In FY21

RAFFLES MEDICAL GROUP LTD (SGX:BSL)

Raffles Medical Group - Eyes Normalisation In FY21

Raffles Medical (SGX:BSL)’s 2H20 PATMI of S$48.6m (+50% y-o-y) was ahead of our and street’s expectations, due to
1. activities related to the COVID-19 battle, and
2. government wage support.
Management expects normalisation of most of Raffles Medical’s operations within FY21, including the return of some foreign patients.

We raise Raffles Medical's FY21-22E earnings per share forecast by 4-20% to factor in the latest outlook. Correspondingly, our DCF target price increases to S$1.10 (WACC: 9%; LTG: 3%). Maintain BUY.

Raffles Medical's FY20 revenue rose 8.8% to S$568.2m.
- Healthcare services rose 17.8%, on the back of COVID-19 related activities such as air borders screening, PCR and serology testing and swabbing of foreign workers.
- Hospital services rose 2.1% as Raffles Medical took on acute patients under the Emergency Care Collaboration (ECC) with the Ministry of Health, as government hospitals focused their battles against COVID-19.
Raffles Medical now has four vaccination centres, with more to open across Singapore.

Raffles Medical expects operations to normalise within 2021. Foreign patients are expected to gradually return as vaccination takes place globally.
Raffles Hospital Shanghai is slated to start receiving patients in 2H21.
Meanwhile, the clinic in Beijing is now fully upgraded to Raffles Hospital Beijing and can support minimally invasive surgeries.
According to Raffles Medical, Raffles Hospital Chongqing saw markedly improved volumes y-o-y.

Raffles Medical's management sounded reassuring on the prospects of normalisation, as the tapering of COVID-19 related activities are expected to be offset by the recovery of foreign patients as well as growth in China.
See Raffles Medical Share Price; Raffles Medical Target Price; Raffles Medical Analyst Reports; Raffles Medical Dividend History; Raffles Medical Announcements; Raffles Medical Latest News.
In our view, key downside risks are our
1. underestimation of China hospitals start-up losses; and
2. overestimation of foreign patient recovery.
Key upside risk is our underestimation of the resilience of COVID-19 related revenues.

Lai Gene Lih CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-02-22

SGX Stock Analyst Report BUY MAINTAIN BUY 1.10 UP 0.990