Raffles Medical - OCBC Investment 2022-08-02: 1H22 Results Beat


Raffles Medical - 1H22 Results Beat

  • Raffles Medical's 1H22 PATMI increased 51.3% y-o-y.
  • China business was impacted by the lockdowns in 2Q22, with a modest recovery outlook ahead amid a continued strict COVID-19 policy stance.
  • Cautiously optimistic on the recovery pace of its China operations and return of foreign patients into Singapore.

Raffles Medical 1H22 PATMI of S$59.7m increased 51.3% y-o-y, beating expectations.

  • Raffles Medical (SGX:BSL)'s 1H22 revenues grew 11.2% to S$382.3m, while EBITDA was up 43.5% y-o-y to S$107m. EBITDA margin expanded 6.7 percentage points (ppt) y-o-y to 28%, driven by higher operating leverage.
  • Key drivers for the solid set of results came from the healthcare services segment, which reported revenue growth of 24.1% y-o-y to S$255.6m as more patients visited general practitioner and specialist clinics. The ongoing management of joint testing and vaccination centres and community treatment facilities also contributed to higher healthcare services revenues.
  • On the other hand, hospital services division declined 11.4% y-o-y to S$151.8m due to lower number of polymerase chain reaction (PCR) diagnostic tests were carried out in 1H22 as COVID-19 related activities tapered off with further economic re-opening.

Raffles Medical's 1H22 revenue breakdown by regions -

  • Singapore accounted for 91.5% of Raffles Medical's 1H22 consolidated revenues, which grew 11.4% y-o-y to S$349.6m. Revenues from Greater China and Rest of Asia grew 5.2% and 21.7% y-o-y respectively to S$24.7m and S$7.9m respectively.
  • China hospitals (in particular Raffles Hospital Shanghai) were unsurprisingly impacted by the extended lockdowns in 2Q22, as the hospitals maintained operations but experienced staffing constraints and disruptions for patients who were unable to travel to its hospitals to seek medical treatment.
  • Approval to open an in-vitro fertilisation/assisted reproductive therapy centre at Le Cheng Hainan, China was received. Operations are expected to commence in 1Q23, which should complement its existing three hospitals offerings within its obstetrics and gynaecology practices for patients in China.
  • Raffles Medical's balance sheet remains healthy as of 30 June 2022 in net cash position (~S$288m in cash).

Overall, management provided a cautiously optimistic outlook.

  • For Singapore, its COVID-19 related activities is likely to continue moderating, as reflected in the decline in PCR test volumes. Currently, Raffles Medical operates two out of six vaccination centres in Singapore, versus 15 centres in July 2021.
  • In China, the recovery outlook will hinge on the pace of economic normalisation, which has seen some hopeful signs such as a recovery in foreign patients and GP clinic visitations exceeding pandemic levels.
  • Raffles Medical is expected to remain profitable for the rest of this year, barring unforeseen worsening of the COVID-19 situation.

Lower fair value estimate for Raffles Medical.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-08-02
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