Raffles Medical Group

Benefiting from Singapore’s reopening

Raffles Medical is set to benefit from Singapore’s reopening, says RHB Securities analyst Shekhar Jaiswal.

Raffles Medical provides Covid-19 testing at its 36 clinics. It was also one of the six firms to be awarded contracts to provide testing services at regional screening centres and dormitories. The gradual reopening of borders bodes well for the company as it operates clinics and offers Covid-19 testing at Changi Airport. In addition, it runs 15 vaccination centres — each of which has a daily capacity of 2,000.

Jaiswal believes the number of doses will pick up given the government’s aim to have around 67% of Singapore’s population vaccinated by Aug 9.

In line with this, he expects the company’s earnings ro rise by 3% to 6% between 2021 and 2023 while profit CAGR hits 25% between 2020–2023.

The strong earnings growth will be aided by local patient load at its healthcare operations returning to pre-pandemic levels and revenue support from the vaccination drive and Covid-19 testing into early 2022.

The likely return of foreign patients to Singapore in 2022 and Raffles Medical’s Chongqing hospital achieving ebitda breakeven in 2022 are also likely to be key earnings drivers, mulls Jaiswal.

Tay Wee Kuang, an analyst at CGS-CIMB agrees with Jaiswal’s hypothesis.

He expects Raffles Medical’s healthcare services revenue ex-Covid-19-related services to grow by 20% in FY2021 to levels comparable to that seen in FY2019.

And as the domestic population continues to be inoculated, Tay foresees that the eventual reopening of borders will bring in more foreign patients in, who typically make up 20% of revenue pre-Covid-19.

To Jaiswal, Raffles Medical’s “valuation remains compelling” since it has delivered 18% returns this year and has outperformed the Straits Times Index (STI) by 7%.

He is maintaining his “buy” call on the company at a revised target price of $1.35. This is up 6 cents from his previous $1.29 call and is believed to give it a 15% upside and 2% yield in 2022.

Tay is also maintaining his “add” call at a higher target price of $1.40. This is up from his previous $1.22 target and is expected to give the counter a 15.8% upside.