Raffles Medical Group - UOB Kay Hian 2021-02-23: 2020 Above Expectations; Recovery In Local Patient Load


Raffles Medical Group - 2020 Above Expectations; Recovery In Local Patient Load

  • Raffles Medical reported 2020 net profit of S$65.9m up 9% y-o-y, beating our expectations. 2H20 saw the recovery of local patient load and elective healthcare services while COVID-19 initiatives also offset the decline in the foreign patient load. As a result, 2H20 revenue was up (+23% y-o-y; +35% h-o-h).
  • While some COVID-19 initiatives are expected to taper off, others such as vaccination centres will provide some support in 2021.
  • Maintain BUY with a slightly higher DCF-based target price of S$1.12.


2020 earnings beat expectations.

  • Raffles Medical Group (SGX:BSL) announced 2H20 earnings of S$48.6m (+50% y-o-y, +183% h-o-h), with the recovery of the local patient load as well as COVID-19 medical initiatives.
  • Full-year profits of S$65.9m were up 9% y-o-y, making up 155% of consensus estimates. This includes government grants of approximately S$28.1m. Excluding grants, earnings would have been down approximately 37% y-o-y.

Dividend framework changes.

  • Final dividend of 2 cents in 2020 was similar to 2019. Full-year payout ratio was at 70% of earnings. For 2021, there will be changes to the dividend framework, as Raffles Medical intends to consolidate its interim and final dividends into a single annual core dividend of up to 50% of its average sustainable PATMI.
  • There will not be a scrip dividend option in 2021, and Raffles Medical may also consider paying a special dividend. Total core and special dividend will amount to not less than 2.5 cents in 2021.

Local operations normalising.

  • Revenue was up (+23% y-o-y, +35% h-o-h), as Raffles Medical recovered from the circuit breaker and lockdown in 1H20. Local patient loads have gradually recovered to pre-pandemic levels in 2H20, supported by the resumption of deferred appointments and surgeries as well as speciality areas like mental wellness.
  • Raffles Medical also conducted COVID-19 initiatives such as air border screenings, COVID-19 Polymerase Chain Reaction (PCR) and serology testing as well as care for foreign workers at community isolation facilities. Hospital services revenue increased 1% y-o-y in 2020, while the healthcare services revenue increased 18% y-o-y.

Costs well maintained.

  • While there were new COVID-19 initiatives, with Raffles Medical hiring more than 1,300 part-time staff in the year, costs were still relatively well maintained. The staff costs/revenue ratio was at 47.4% (-3.7ppt y-o-y; -9.2ppt h-o-h). There are, however, structural shifts, such as higher public nurses wages recently announced by the government which would indirectly affect the private sector as well.
  • Raffles Medical’s gestation loss for Chongqing Hospital is still within expectations according to management, with EBITDA loss of less than S$10m in 2020.


Vaccination centres to maintain momentum of COVID-19 initiatives.

  • COVID-19 initiatives have aided Raffles Medical’s healthcare services in 2020. While certain initiatives such as the community care facilities, could taper off in 2021, other initiatives such as vaccination centres could pick up till 3Q21. Raffles Medical has four dedicated vaccination centres to date. According to The Straits Times, there are currently 11 centres in operation, with the full complement of around 40 centres to be operational by end Apr 21.

China hospital updates.

  • Management noted that the Chongqing Hospital had an improved patient load in 2020, though this comes off a low base in 2019. For the Shanghai hospital, fitting-out works and installation of medical equipment are nearing completion with patients expected in 2Q21. Guidance for gestation losses remain unchanged (EBITDA: -S$10m [first year]; -S$5m [second year]; Breakeven [third year])

Upbeat about medical tourists.

  • Foreign patients are still lacking for Raffles Medical and it could likely see a better patient load as vaccination programmes start to pick up regionally in 2021.


  • Raise Raffles Medical's earnings forecasts slightly by 2-5% for 2021-22. We factor in slightly a stronger local patient load with the sustained recovery in domestic medical services, as well as new COVID-19 initiatives.



  • Potential catalysts include:
    1. faster-than-expected ramp-up of the new specialist centre;
    2. better-than-expected ramp-up of new hospitals in China; and
    3. recovery in foreign ient load.

Lucas Teng UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2021-02-23
SGX Stock Analyst Report BUY MAINTAIN BUY 1.12 UP 1.070