Raffles Medical Group - DBS Research 2021-07-27: Press On With Tests And Vaccination


Raffles Medical Group - Press On With Tests And Vaccination

  • Raffles Medical's strong 1H21 results with contributions from COVID-19 services and recovery getting closer to pre-COVID levels, above our estimates.
  • Healthcare services is 77% above pre-COVID, while hospital services is 16% below.
  • Expanded COVID-19-related services and treatment of severely ill foreign patients will lead recovery.
  • Maintain BUY on Raffles Medical; raised target price to S$1.48.

Strong 1H21 results with strong contributions from COVID-19-related services and recovery getting closer to pre-COVID levels

  • Raffles Medical (SGX:BSL)’s 1H21 PAT grew 129% y-o-y to S$39m, above our estimates, mainly due to a low base in 1H20 and contributions from COVID-19- related services, partially offset by lower government grants such as the Job Support Scheme (JSS) and property tax rebate. Excluding estimated government grants, EBITDA is estimated to be ~S$69m (-1% h-o-h).
  • Revenue grew 42% y-o-y to S$344m mainly from growth in both healthcare services (+65.4% y-o-y) and hospitals services (+35.4% y-o-y).
  • More importantly, we note that healthcare services is 77% above pre-COVID (1H19 revenue), while hospital services is still 16% below pre-COVID due to fewer incoming foreign patients, except those who are severely sick.
  • Similar trends observed, Raffles Medical's 1H21 EBTIDA +78% y-o-y to S$74.5m, 53% above pre-COVID level (1H19 EBITDA). 1H21 EBITDA margins at 22%, slightly higher compared to 1H19 possibly due to higher margins from COVID-19-related services.
  • Raffles Medical's 1H20 revenue from Singapore and Greater China grew 43% y-o-y and 58% y-o-y, respectively, while the rest of Asia fell 13% y-o-y.
  • As previously announced, Raffles Medical will combine its interim and final dividend into a single dividend with a dividend policy of a 50% payout. The special dividend will still be considered when necessary. However, during the transition year of FY21, Raffles Medical has committed to at least 2.5 cents of dividend per share (a ~2% yield).

Key business updates –

Expansion of COVID-19 initiatives in both Singapore and China; Severely ill foreign patients can seek treatment in Singapore; RafflesHospitalShanghai opening today.

  • In Singapore, Raffles Medical continues to support the government’s COVID-19 initiatives. It has expanded its operations to include 17 vaccination centres, pre-departure swabbing of cruise passengers, and PCR test centres to conduct tests for new clusters as they emerge. Foreign patients have yet to return in a big way due to travel restrictions, except those who are severely ill.
  • In China, while there are sporadic occurrences of new clusters in China, the situation has been largely under control and operations in China have returned to normal with improving patient loads.
  • We understand that RafflesHospitalChongqing EBITDA losses are on track with management’s guidance of S$5m to S$6m in year three of operations. We guesstimate EBITDA losses in 1H21 at S$2.5m to S$3m.
  • RafflesHospitalShanghai will be opening today, 26 July 2021. No change in gestation period guidance of 3 years to EBITDA breakeven.
  • The two hospitals (Chongqing and Beijing) and Raffles Medical clinics in China have also stepped up and participated in the local government’s COVID-19 vaccination efforts.

Maintain BUY; raise our target price to S$1.48.

Rachel Lih Rui TAN DBS Group Research | https://www.dbsvickers.com/ 2021-07-27
SGX Stock Analyst Report BUY UPGRADE HOLD 1.48 UP 0.950