Raffles Medical - Maybank Research 2023-11-06: Hitting The Brakes; 3Q23 Results Below Expectation

• Raffles Medical (SGX:BSL)'s 3Q23 NPAT of S$12.4m (-67.4% y-o-y) came in way below our and market expectations. This took 9M23 earning to S$72.8M (-25.6% y-o-y), which forms ~61% of MIBG/street forecasts for FY23.
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Cost inflation further erodes margins

• Raffles Medical's 3Q23 turnover fell 24.6% y-o-y to S$161.6m, mainly dragged by its Healthcare Services division. While its Hospital segment still showed positive growth (around low-single digit), we think this may have been driven by local patients as foreign volumes are still below pre-COVID levels given the relative strength of S$ against regional currencies.
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To rationalise China operations

• According to management, patient visits to Raffles Medical’s China operations have increased with the cessation of COVID restrictions early this year. Although revenue has improved, its hospitals in Shanghai and Chongqing are still in the developmental phase and continue to incur gestational costs.
• To achieve better operating efficiencies, Raffles Medical has commenced right-sizing and rationalising its China operations by shifting its resources to specialties with higher demand, as well as deploying some of its nurses from Chongqing to its Shanghai hospital.

Strong balance sheet with growing cash

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Eric Ong Maybank Research | https://www.maybank-ke.com.sg/ 2023-11-06 SGinvestors.io

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