DBS Group Research’s Rachel Tan has upgraded her rating on Raffles Medical to “buy” from “hold” with a raised target price of $1.40, up from her previous target price of 95 cents. 

“We applied the historical mean price-to-earnings or P/E (from 2012) of 30 times to
average FY2021-FY2022 earnings, plus 20 cents per share for its China hospitals,” she writes.

In a June 7 report, she says the group is “the biggest beneficiary of Singapore’s new norm – the “test, trace and vaccinate” strategy announced by the Republic’s prime minister Lee Hsien Loong on May 31.

Tan noted Raffles Medical is the largest Covid-19 service provider, and by extension, is the biggest beneficiary of more routine tests and accelerated vaccination programme, which could last longer than expected.


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As part of the accelerated vaccination program, the Singapore government targets all eligible individuals to receive at least one dose of the vaccine by National Day, Aug 9. At least 2.2 million of the population is currently vaccinated with at least one dose.

Raffles Medical has been the biggest partner in the government’s COVID-19 efforts. It is currently managing 16 vaccination centres (about 40% of the current 40 centres), In addition, 2 Raffles Medical clinics are offering vaccination services as well.

In comparison, the second-largest partner is Fullerton with nine centres, and then Minmed with four centres.

Furthermore, she thinks Raffles Medical will stand to benefit from the reopening of travel borders, with pent-up demand from foreign patients and tests, as traffic increases at Changi Airport.

“As Singapore speeds towards achieving herd immunity via vaccination, we believe the reopening of travel borders is getting closer, barring any further major outbreaks from new variants,” Tan highlighted

She also believes the progressive return of traffic at Changi Airport will drive more Covid-19 tests to be conducted as travel border restrictions are relaxed, and as such, more revenue from Covid-19 related services. 


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Despite the vaccination, she expects these tests will remain mandatory for longer to minimise any potential new transmissions despite the vaccination.

Tan is predicting earnings could surpass pre-Covid level in FY2022, with contributions from Covid-19 related services and medical tourism.

“Given the large-scale Covid-19 efforts in FY2021, we expect contribution from COVID-19 related services to expand in FY2021 and offset some of the gestation losses from Raffles Hospital Chongqing and the upcoming opening of Raffles Hospital Shanghai.” she adds.

While Covid-19 related services might moderate a little in FY2022 as less vaccination centres would be needed, she expects the return of medical tourism when travel borders reopen to drive earnings. 

The delay in the opening of Raffles Hospital Shanghai could reduce potential gestation losses to be recognised in FY2021, and this could lead to further potential upside to estimates.

As at 1.40 pm, shares of Raffles Medical were trading at $1.14, with a FY2021 dividend yield of 2.2% and price to book ratio of 2.2 times.