- Raffles Medical (SGX:BSL)’s 3Q23 performance moderated more than expected after delivering an exceptionally stellar year in FY2022, which forms a high base.
- 3Q23 PAT fell by 67% y-o-y to S$12.4m and 9% below that of 3Q2019. 9M23 PAT fell 26% y-o-y to S$72.8m, making up 53% of our FY23F estimates.
Cost inflation, gestation losses from China continue to weigh on performance
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- The standalone vaccination centres have been discontinued and there has been a drop in COVID tests as we return to normalisation.
- In addition, RafflesHealthInsurance (RHI) registered higher claims in 3Q23.
- Operationally, Raffles Medical’s contract to manage the Transitional Care Facilities (TCF) at Expo has been extended to Feb 2025. However, management expects profit will likely be less now, given that the tenders were a lot more competitive.
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- Nevertheless, the gestation losses of the two China hospitals (RafflesHospital Chongqing and RafflesHospital Shanghai) are within expectations.
- As the ramp-up of the hospitals were disrupted by the COVID-19 pandemic, management expects the ramp-up of both hospitals to resume this year, with ~S$10m of EBITDA losses at each hospital, and targets potential breakeven by year 3.
Maintain HOLD rating but lower target price to S$1.00.
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