Raffles Medical Group - Healthcare Demand Stronger Than Ever
- Raffles Medical (SGX:BSL)’s revenue grew by 11.2% y-o-y to S$382.3m in 1H22, underpinned by Singapore operations which made up 91.5% of total revenue. 1H22 revenue/earnings exceeded estimates at 59.3%/55.9% and 81.5%/75.5% of our and consensus’ FY22F estimates.
- Net of inter-segment sales, healthcare services revenue grew by 22.0% y-o-y, offsetting the 5.1% decline in hospital services.
- Healthcare services include outpatient services in GP and specialist clinics, whose visits were noted by management to have surpassed pre-COVID-19 levels. Ongoing management of joint testing and vaccination centres (JTVCs), and community treatment facilities (CTFs) also contribute to the segment.
- The decline in hospital services revenue was a result of lower COVID-19 testing services, although the impact was partially offset by returning foreign patients, which reached 60% of pre-COVID levels.
- Raffles Medicals EBITDA margin expanded by 6.7% points y-o-y, as revenue growth outpaced staff costs (+7.2% y-o-y) and a decline in inventories and consumables expenses by 23.0% y-o-y due to lower contribution from COVID-19 testing.
- Raffles Medical’s hospitals in China continued operations throughout 1H22, although sporadic lockdowns across cities have resulted in staffing constraints. Despite losses for its Chongqing and Shanghai hospitals, Raffles Medical continues to establish its reputation in China. We view its plans to expand into Obstetrics and Gynaecology (OBGYN) as a way to establish a specialty within China, and could help better build Raffles Medical’s brand in China given the better perception of specialty hospitals vs a general hospital.
- We increased our EPS forecasts for FY22-24F by 43.0%/27.5%/40.5% on higher local patient volumes and returning foreign patients. Reiterate ADD call on Raffles Medical with a higher target price of S$1.50, pegged at 16x FY23F EV/EBITDA, 0.5 standard deviation below its 5-year mean, with a discount for gestating China assets.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
TAY Wee Kuang CGS-CIMB Research | https://www.cgs-cimb.com 2022-08-01 2022-08-01
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