RAFFLES MEDICAL GROUP LTD (SGX:BSL)
Raffles Medical Group - No PCR, So What?
- Raffles Medical (SGX:BSL)’s 1H22 PATMI of S$59.7m (+51.3% y-o-y) strongly exceeded market expectations at 79% and 83% of our and street’s full year estimates, respectively. This comes on the back of robust recovery in patient numbers in both business segments following the relaxation of COVID-19 restrictions in Singapore.
Primary care clinics benefit from reopening
- To our positive surprise, Raffles Medical's 1H22 revenue continued to grow by 11.2% y-o-y to S$382.3m, lifted by its Healthcare division (+24.1% y-o-y to S$255.6m) on a higher local patient load to its GP clinics with the resumption of more social activities.
- While turnover from the Hospital Services division fell by 11.4% y-o-y to S$151.8m due to a decrease in the number PCR diagnostic tests carried out, the decline was less than expected, partly mitigated by the return of foreign patient volumes (~60% of pre-pandemic level) and higher-margin elective procedures.
Operations in China to delay breakeven by a year
- Raffles Medical's EBITDA jumped 43.5% y-o-y to S$107m in 1H22 on lower inventories and consumables cost (in tandem with less PCR tests), coupled with positive operating leverage.
- Raffles Medical’s balance sheet remains strong with net cash of S$135m. As expected, management guided that its two hospitals, in Chongqing and Shanghai, will likely delay EBITDA breakeven by a year to FY23E and FY24E, respectively, amid China’s COVID-zero policy.
Opening an IVF/ART centre in Hainan in 1Q23
- Raffles Medical has received approval to set up an IVF/ART centre at Bo Ao Le Cheng, Hainan, which will complement its three existing hospital offerings and forms a full life cycle service chain within its O&G practices for its patients across China. It targets to serve about 40m women in China who may require reproductive fertility services.
- Pending final licensing inspection approval, the asset-light IVF/ART Centre is estimated to cost less than S$10m and is scheduled to commence operation in 1Q23.
- See
- We raise our FY22-24E EPS forecast for Raffles Medical by more than 30% driven by a higher Healthcare services’ contribution and margin. We roll forward our DCF-based valuation to FY23E and maintain BUY recommendation on Raffles Medical with a higher target price of S$1.57 (LTG: 2.5%, COE: 8%), up from S$1.50.
Eric Ong
Maybank Research
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https://www.maybank-ke.com.sg/
2022-08-02
SGX Stock
Analyst Report
1.57
UP
1.500
