Raffles Medical Group - OCBC Investment 2023-02-27: Regional Re-opening Tailwinds

• Raffles Medical's 2H22 revenue and net profit of S$384.2m and S$83.8m grew 1.1% and 86.6% y-o-y respectively, with foreign patients returning to seek medical treatment in Singapore while the operations of vaccination centres in Singapore tapered off. In July 2022 however, Raffles Medical started the first Transitional Care Facility to manage chronically ill patients from public hospitals.
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• For 2H22, staff costs were accounted for about 38% of top line, versus a higher contribution close to 50% in the past.

Raffles Medical's FY22 earnings beat

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• Reflecting regional re-opening tailwinds as patients returned to its clinics, Raffles Medical’s FY22 revenue from the healthcare division increased 8.6% to S$498.3m. Its hospital services division revenue fell by 8.6% to S$316.3m, dragged by a lower number of PCR (polymerase chain reaction) diagnostic tests in FY22. EBITDA was up 47% while PATMI increased 70.5% driven by cost controls and manpower management, lower inventories and consumables.
• Raffles Medical’s China healthcare business was impacted for most of FY22 due to China’s zero-COVID tolerance policy, which was eased in December 2022 and should improve.
• Raffles Medical closed FY22 with healthy cash position of S$252.1m. Final dividend of S$0.038 per share was proposed (+35.7% y-o-y) which implies ~2.6% yield based on Raffles Medical's Share Price on 24 February 2023. See Raffles Medical's dividend dates.

Fair value estimate lifted to S$1.60

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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2023-02-27 SGinvestors.io

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