Raffles Medical (SGX:BSL)'s FY24 earnings below due to a higher-than-expected effective tax rate. The group reported earnings of S$62.2mil (-24.8% y-o-y) on S$751.6mil (+6.3% y-o-y) in revenue, with earnings below our expectations despite revenue being broadly in line.
Vitals on the road to recovery
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At the segment PBT level,
healthcare services declined 33% y-o-y to S$45.1mil due to fewer government grants and the absence of COVID-19 services in FY24 vs FY23.
Hospital services PBT grew 10% y-o-y to S$35.7mil, buoyed by a 10% increase in revenue from China hospitals, while the
health insurance arm (RHI) showed a 10.4% y-o-y improvement due to diligent claims adjudication and expense management.
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China hospitals will likely continue to be a drag
China hospitals will likely continue to be a drag, albeit to a lesser extent as Raffles moves towards breakeven in FY26. Revenue from China has grown 10.1% due to greater recognition of the Raffles brand in China, which in turn led to an improved hospital services PBT margin of 12.4% (+1.1 ppt y-o-y).
While gestational losses at Shanghai and Chongqing hospitals remain a drag to the group’s earnings, we believe that these losses should trend lower as the company executes plans to achieve breakeven in FY26, which should lead to a further improvement in the hospital services margin.
Operating leverage to drive improvement in profitability as RHI top line grows.
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Above is an excerpt from a report by DBS Group Research. Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.
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