PhillipCapital is maintaining its “neutral” call on Raffles Medical with a revised target price of 94 cents. This is down 5 cents or 5.05% from its previous 99 cent call, analyst Tay Wee Kuang says in a July 29 note.

He believes the revised price will give the company a 4.9% upside from its 92 cent close on July 28.

Tay’s move is in response to the healthcare provider’s earnings for 1H2020 ended June where it posted a 38.2% drop in earnings to $17.2 million. This comes on the back of a deferment in elective surgeries and a dip in foreign patients, particularly during the circuit breaker period

Similiarly, its operations in China took a hit from the closure of its clinics and a smaller patient load at its RafflesHospital Chongqing due to the movement restrictions imposed there.

See: Raffles Medical posts 38.2% drop in 1H2020 earnings, but expects to "remain profitable" this year

Tay considers the group’s performance in China a “setback”. “RafflesHospital Chongqing was slated to breakeven in fy21. However, the group expects breakeven to be delayed by up to a year, prolonging gestation period and cost”.

Meanwhile, operations at its RafflesHospital Shanghai is in its final stages of out-fitting and slated to begin operations at end FY2020.

Elsewhere, Tay notes a gradual return to the group’s operations across its other geographies.

“As cross-border travel begins to ease, Hospital Services is likely to recover, as foreign patients make up 20 to 30% of revenue in Singapore. Margins will also revert to previous levels as contribution from in-patient services pick up,” he muses.

To this end, Tay is revising his FY20e earnings estimate downwards by 25% to account for the slowing business momentum in 1H20.

“The current shift in business dynamics does not represent the nature of the Group’s business in a steady-state environment as Hospital Services segment was depressed from business restrictions during the pandemic,” he stresses.

He expects business momentum from the Hospital Sevices segment to return gradually with healthier margins, bringing a recovery by FY21.

As at 11.10am, shares of Raffles Medical were flat at 92 cents.