RHB Group Research analyst Shekhar Jaiswal has upgraded Raffles Medical to “buy” from “neutral” with a higher target price of $1.29 from 91 cents previously.

The upgrade comes amid anticipation that the private medical provider will return to business as usual.

Jaiswal expects the group to deliver over 25% in profit growth over the next two years from its Singapore patient load returning to pre-pandemic levels in 2021, as well as revenue support from the vaccination drive.

Foreign patient demand, says Jaiswal, is likely to return only in 2022.


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“Our 2021 forecasts factor in a gradual reduction in government support, and likely higher staff costs, in response to the government raising salaries for healthcare workers,” he writes in an April 7 report.

In addition, Jaiswal foresees the group’s hospitals in China to achieve a breakeven in EBITDA within three to four years.

“The Chongqing hospital, which commenced operations in 2019, saw improvements in patient load in 2HFY2020, and Raffles Medical expects operations to ramp up over the next two years. It expects the hospital to achieve EBITDA breakeven in 2022,” he says.

“The hospital receives a higher number of local patients as it is registered with Chongqing’s social health insurance – Yibao. Last year, its outpatient clinic in Beijing was upgraded to a hospital, and its Shanghai hospital is set to open in 2QFY2021. We expect the Shanghai hospital to achieve EBITDA breakeven in 3 years.”

Raffles Medical is also looking to optimise its capital structure and raise debt to support further growth, which Jaiswal views as positive.


SEE:Founders of Raffles Medical Group and Credit Bureau Asia raise respective stakes


The group will consolidate its interim and final dividends into a single annual dividend of up to 50% of its average sustainable profits. While Raffles Medical will retain the 2020 dividend of 2.5 cents a share, it will remove the option for scrip dividends in 2021.

To this end, “we believe valuations are compelling, given the strong (over 25%) profit growth expected during the forecast period,” he writes.

As at 1pm, shares in Raffles Medical are trading 1 cent higher or 0.9% up at $1.18.