RAFFLES MEDICAL GROUP LTD (SGX:BSL)
Raffles Medical Group - Growth Set To Normalise Post-Pandemic
Cuts FY22-24E EPS but remain long-term positive
- Raffles Medical (SGX:BSL)'s FY21 PATMI of S$84.2m (+27.7% y-o-y) came in ahead of MIBG and consensus estimates by 9%/11%. While 2H21 net profit fell 8.1% y-o-y to S$44.7m on lower other operating income (-56.2% y-o-y), arising from less government grants such as JSS payout and property tax rebate, this was largely expected, in our view.
- Raffles Medical declared a slightly higher-than-expected final dividend of S$0.028, which comprises core dividend of S$0.018 cents and a special dividend of S$0.01 for FY21.
Expects COVID-19 support activities to taper off
- Raffles Medical's 2H21 revenue grew by 16.3% y-o-y to S$380m, boosted by sales of COVID-19 related products & services given the Delta-strain wave.
- On a segmental basis, turnover from the Healthcare Services division grew by 61.3% y-o-y, whilst Hospital Services division declined by 6.2% y-o-y in 2H21.
- We forecast COVID-19 support activities to taper off sequentially, especially its PCR test revenues as Singapore relaxes testing protocols for VTL travellers.
- On a positive note, international travel should gradually resume and we expect some of Raffles Medical's regional patients to return as borders reopen.
Breakeven of China hospitals may be delayed
- Meanwhile, China is experiencing sporadic COVID-19 clusters that may impact some of Raffles Medical’s operations there. Management has guided that break even for its Chongqing hospital is likely to be delayed by a year to 2022, and Shanghai operations could incur EBITDA loss of S$10m this year. That said, Raffles Medical remains optimistic its three hospitals in China will continue to see improved patient loads with easing movement restrictions.
Beneficiary of the increased focus on primary care
- In the recent Budget 2022, the government proposed to restructure the local healthcare eco-system by allowing GPs to play a greater role given the fast-aging population. This should also benefit Raffles Medical in the longer term given its large primary care networks.
- We cut our FY22-24E earnings per share (EPS) forecast for Raffles Medical by 8-12% due to lower contributions from COVID-19-related services and its China hospitals. This reduces our DCF-based target price for Raffles Medical to S$1.50 (LTG: 3%, COE, 8%) but maintain BUY with 16% upside potential.
- Transfer coverage on Raffles Medical to Eric Ong.
- See
Eric Ong
Maybank Research
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https://www.maybank-ke.com.sg/
2022-02-21
SGX Stock
Analyst Report
1.50
DOWN
1.680
