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Raffles Medical - RHB Invest 2022-06-20: Slower Ramp Up in China Operations; Keep BUY

RAFFLES MEDICAL GROUP LTD (SGX:BSL) | SGinvestors.io RAFFLES MEDICAL GROUP LTD (SGX:BSL)

Raffles Medical - Slower Ramp Up in China Operations; Keep BUY

  • While China’s COVID-19 cases have eased and so have the related lockdowns, we believe its impact on Raffles Medical (SGX:BSL)’s China operations could still be visible in 1H22 earnings. With China doubling down on a zero COVID-19 policy and fresh announcements of mass-testing drives, could delay the ramp up in Raffles Medical’s China operations.
  • Nevertheless, we remain optimistic on Raffles Medical’s Singapore operations gradually reverting to normal and on it, delivering growth in 2023 and beyond.
  • After a weak share price performance, Raffles Medical's valuations are looking compelling as well. Reiterate BUY, new S$1.50 target price from S$1.55, 34% upside and ~2% yield.



Return of medical tourism and normalised business operations to offset decline in COVID-19 related revenues.

  • Prior to the pandemic, it is estimated that the foreign patient arrivals in Singapore were at around 500,000 a year. While current numbers are hard to come by, news report suggests that medical tourists were returning back to Singapore since 1 Apr 2022, when the COVID-19 restrictions were eased, more flights were added, and the need for special clearance to come to Singapore for treatment was removed.
  • Raffles Medical has seen foreign patients from Indonesia, Cambodia, and Vietnam returning to Singapore. This, in addition to normalised business operations for Singapore healthcare clinics and hospital operations, would help Raffles Medical offset the decline in COVID-19 related revenues.


China growth may get delayed.

  • We had expected Raffles Medical’s Shanghai hospital, which commenced operations in 2021, to see meaningful revenue in 2022. Nevertheless, the COVID-19 related lockdowns that Shanghai witnessed in 2Q22 could have delayed the ramp up in Shanghai operations.
  • As per original estimates, Raffles Medical’s Chongqing hospital was expected to see an EBITDA breakeven by end 2022. The Shanghai hospital was expected to achieve an EBITDA breakeven by 2024.
  • We believe China reinforcing its zero COVID-19 policy and fresh announcements of mass-testing drives in Beijing and Shanghai could further delay the ramp up in Raffles Medical’s China operations.

Lowering near term growth; still positive on long-term outlook.

  • We see 2022 as a transition year for Raffles Medical, as the decline in COVID-19-related revenue should be partially offset by higher Singapore revenue. High inflation and the tight labour market would also keep operating costs elevated.
  • We lower 2022-24 profit estimates 3-4%, but maintain that Raffles Medical should deliver profit growth in 2023-24.


Net cash position; compelling valuations.






Shekhar Jaiswal RHB Securities Research | https://www.rhbinvest.com.sg/ 2022-06-20
SGX Stock Analyst Report BUY MAINTAIN BUY 1.50 DOWN 1.550



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