SINGAPORE (Sept 25): The ongoing haze has little impact on healthcare providers in terms of revenue or share price, but prolonged haze conditions showed an increase in admissions to private hospitals, an analysis by CGS-CIMB Research has found.
“Our correlation analysis suggests that share prices of healthcare companies under our coverage, Raffles Medical Group (RFMD) and IHH Healthcare, have very weak associations with PSI readings; there were also negative correlation coefficients over certain periods,” says analyst Ngoh Yi Sin in a Tuesday report.
The equities research firm notes that there were “weak and mixed” correlations between PSI readings during the haze from 2013 to 2016 and the share prices of RFMD and IHH.
“Visual comparisons of share price movement against PSI readings for both RFMD and IHH seem to suggest a mixed and weak association between these two variables,” Ngoh notes. “[We observe that] correlations of PSI readings and share prices were not strong for RFMD and IHH, while there were negative correlation coefficients over certain time periods.”
This suggests that the haze did not result in a strong or noticeable movement in the share prices of these healthcare providers.
However, the research notes that in the affected months throughout 2013 to 2016, private hospital admissions rose significantly in October 2014 and 2015. This coincided with the worst haze Singapore had seen in recent years, when the PSI level reached the hazardous level of 471 on October 2015, forcing schools to close.
“We did not observe a material increase in overall acute hospital admissions in Singapore, but private hospital admissions rose significantly during those times, which coincided with topline growth and higher inpatient admissions for RFMD and IHH respectively,” Ngoh says.
Moreover, prolonged periods of severe haze could have driven higher local inpatient admissions and clinic visits, potentially offsetting the fewer medical tourists who had opted to delay their elective treatments due to the hazy conditions, she adds.
CGS-CIMB is maintaining its “add” call on IHH with a target price of RM6.37 while keeping its “hold” recommendation on RFMD with a target price of $1.10.
Forest fires in Indonesia, allegedly from uncontrolled burning in palm oil plantations linked to Malaysian and Singapore companies, has caused severe haze in Singapore over the past two weeks, with PSI readings at ‘unhealthy’ levels of 101 to 200.