Raffles Medical Group - Not Stepping Down On COVID-19 Efforts
- Raffles Medical (SGX:BSL) continues to be involved in Singapore’s efforts to manage the COVID-19 pandemic through the operation of Joint Testing and Vaccination Centres (JTVCs) and Connect@Changi, a Community Care Facility (CCF) that has since been re-purposed to receive COVID-19 patients with mild symptoms who are not eligible for home recovery, patients recovering from COVID-19 who are decanted from public hospitals as well as non-COVID-19 patients who require non-acute hospital care awaiting post-discharge arrangements. We view that such COVID-19-related services remain integral to preserving healthcare resources, especially given the crowds in public hospital emergency departments over the past few months.
- According to data from the Ministry of Health (MOH), admissions to public hospitals and accident and emergency (A&E) departments returned to pre-COVID-19 peak levels as of July and we believe that the recent increase in COVID-19 cases suggests that more patients will be transferred to CCFs, such as Connect@Changi.
- Raffles Medical will also be extending its JTVC operations by 15 months after being awarded the latest government tender, suggesting vaccination services are likely to continue, especially with the availability of the Moderna bivalent vaccine, which will keep the population protected as immunity wanes over time and given the potential emergence of new COVID-19 variants.
- We reiterate our ADD call on Raffles Medical with a higher target price of S$1.60 as we roll forward our valuation to FY24F while adjusting our FY22-24F earnings upwards by 2% to take into account higher revenues from COVID-19-related services.
- We also wish to highlight that Raffles Medical noted during 1H22 that patients at its outpatient clinics have surpassed pre-COVID-19 levels despite lower outpatient specialist visits reported by MOH, suggesting an increase in market share.
- Our target price for Raffles Medical is pegged at 15x FY24F EV/EBITDA or 0.5 standard deviation below its 5-year historical average to reflect a lower trading band over the past two years.
- Re-rating catalysts include more extensive collaboration with the public healthcare system, a shorter gestation period for its China operations and a swifter return of medical tourism.
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 2022-10-24 2022-10-24
Read also CGS-CIMB's most recent report:
2022-11-01 Raffles Medical - In The Pink Of Health.