RAFFLES MEDICAL GROUP LTD (SGX:BSL)
Raffles Medical Group 1H21F Earnings Preview - Gradual Return Of Patients
- We expect Raffles Medical Group (SGX:BSL) to beat consensus earnings forecasts in 1H21 amid higher healthcare services revenue from more specialist outpatient clinic visits.
- COVID-19 testing numbers continue to hold up despite the faster vaccination rates, underscoring the importance of PCR testing to reopening measures.
- We lift our FY21-23F earnings forecast for Raffles Medical by 7.5-15.6% to account for higher patient numbers. We reiterate our ADD call on Raffles Medical with a higher SOP-based target price.
Domestic patients seem to have returned
- According to the Ministry of Health (MOH), specialist outpatient clinic visits across the industry recovered in Jan-Apr 2021, vs the same period in 2020. Average monthly visits were 23% higher compared to 2020, and were 4% higher than pre-COVID-19 levels in 2019.
- Higher footfall at Raffles Medical’s clinics could translate to higher healthcare services revenues in FY21F, in our view. With the return of domestic patients to clinics, we estimate healthcare services revenue, ex-COVID-19-related services, to grow by 20% in FY21F to levels comparable to FY19’s healthcare services revenue.
Missing foreign patients could be back in FY22F
- MOH data also typically make up ~20% of revenue pre-COVID-19, to return in FY22F.
COVID-19 testing thesis remains intact
- Singapore ramped up its COVID-19 testing from Changi Airport Group (CAG) contract to conduct testing for all inbound passengers. Year-to-date, Changi Airport has received 373k passenger arrivals, which translates to an average of 2.5k tests per day.
Earnings revision - Reiterate ADD call on Raffles Medical with a higher target price
- We had estimated COVID-19-related services contributed S$82.6m to Raffles Medical’s healthcare restrictions to be relaxed in FY22, which could see a return of foreign patients, resulting in our earnings upgrade by 15.6% in FY22F, supported by normalised domestic and foreign patient load.
- This report marks a change in covering analyst. We increase our SOP-based target price for Raffles Medical to S$1.40 with potentially higher patient visits to clinics and adjust the normalised PBT margins for Raffles Medical’s Singapore operations from 11.5% to Raffles Medical’s 5-year historical average at 13%.
- Raffles Medical's valuation remains attractive at a forward EV/EBITDA of 17.0x, compared to regional peers’ 21.4x.
- See
- Re-rating catalysts include an earlier return of foreign patients with potential border reopening in 2H21F.
- Downside risks include thinner margins from COVID-19-related services.
TAY Wee Kuang
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-07-12
SGX Stock
Analyst Report
1.40
UP
1.220
