Analysts at UOB Kay Hian, Maybank Securities and OCBC Investment Research (OIR) lift their target prices for Raffles Medical Group BSL 0.00%   (RMG) to $1.85, $1.65 and $1.60 respectively following the company&rsquo s FY2022 results announcement.

 

RMG announced record revenue and patmi at $766.5 million and $143.5 million respectively, forming 99% and 107.2% of UOBKH&rsquo s Llelleythan Tan Yi Rong&rsquo s full-year forecast. The analyst, who has maintained his &ldquo buy&rdquo call, expects revenue to soften in 2023 on the back of lower Covid-19 related revenue.

 

The company also recorded 61.4% y-o-y growth in operating profit, while operating margins expanded by 8.8 percentage points y-o-y. Tan expects operating margins to contract slightly in 2023, dragged by higher inflationary cost push and an ongoing shortage of healthcare workers in Singapore.

 

Maybank&rsquo s Eric Ong, who has a &ldquo buy&rdquo call on the stock, highlights that RMG&rsquo s ebitda jumped 50% y-o-y to $129.1 million. The significant margin expansion comes from positive operating leverage. While he thinks that the company&rsquo s FY2023-FY2025 margins may come off from elevated levels, it should be partly supported by continued growth in foreign parents as well as pent-up demand from higher-margin electives.

 

Meanwhile, DBS Group Research' s Rachel Tan expects RMG' s earnings growth to moderate in FY2023, given the exceptionally high base. This could cap the share price upward momentum in the near-term, she adds.

 

DBS has downgraded RMG to " hold" , with a lower target price of $1.48 from $1.64 previously.

 

Backed by a robust balance sheet with net cash of $180 million, RMG is open to explore new business opportunities such as potential mergers and acquisition in other markets to further complement its existing healthcare services, Ong points out.

 

As part of its longer term growth strategy, RMG aims to expand in the Chinese healthcare market, OIR analysts say. It now has two international tertiary hospitals in Beijing and Shanghai, in addition to Raffles Chongqing hospital which opened in January 2019.

 

The gestation period for the Raffles Shanghai hospital &mdash which opened on July 16, 2021 &mdash was previously expected to take about three years based on the Chongqing hospital experience. However, it could be delayed due to pandemic impact, the analysts add. OIR has kept its &ldquo hold&rdquo call on RMG.

 

Despite sporadic lockdowns in major cities, geographical revenue from China grew by 1.2% y-o-y in 2022. With the removal of China&rsquo s zero-Covid policy, hospital staff and patients are now able to commute freely, says Tan.

 

&ldquo Although ongoing Covid-19 waves have increased patient loads, it has created an unfavourable product mix which would likely compress margins. However, as Covid-19 eventually blows over in China, we are now more positive on the prospects of RMG&rsquo s Chinese hospitals and reckon that it would be its core revenue driver moving forward,&rdquo he adds.

 

UOBKH maintains its ebitda breakeven level timeline for Raffles Hospital Chongqing at 3QFY2023 and Raffles Hospital Shanghai at 4QFY2025 respectively.

 

Tan raises his FY2023 and FY2024 earnings forecasts, aside from adding his FY2025 earnings estimates on the back of higher hospital revenue assumptions. The analyst now expects 2023-2025 patmi of $129.4 million, $108 million, and $100.9 million respectively.

 

Meanwhile, Maybank&rsquo s Ong raises his FY2023-FY2024 EPS forecasts by 9%-12% on better margins assumption.

 

RAFFLES Medical Group : BSL +2.04% posted an 87.5 per cent rise in net profit for the second half of 2022, on better cost control and manpower deployment, along with lower inventories and consumables used.

 

Foreign patients also returned to Singapore to seek medical treatment during the period, as Covid-19 restrictions eased and borders reopened, the healthcare services provider said on Monday (Feb 27).

 

Net profit for the six months ended Dec 31, 2022, stood at S$83.8 million, compared with S$44.7 million posted in the same period a year ago. This translates to earnings per share (EPS) of S$0.0452, against an EPS of S$0.0239 in the year-ago period.

 

Revenue rose 1.1 per cent year on year to S$384.2 million, from S$380 million.

 

There was a 28.6 per cent reduction in staff costs to S$145.6 million, from S$204.1 million. Meanwhile, inventories and consumables used dropped 27.9 per cent to S$29.7 million, from S$41.2 million.

 

Raffles Medical reported a return of foreign patients seeking medical treatment in Singapore in the second half of 2022. Covid-19 activities relating to vaccination centres tapered off during the period, while some community treatment facilities evolved into step-down care facilities.

 

The board has proposed a final dividend of S$0.038 per share. In the same period a year ago, the board recommended a final dividend of S$0.018 per share and a special dividend of S$0.01 per share.

 

For the full year ended Dec 31, 2022, net profit rose 70.5 per cent to S$143.5 million, translating to an EPS of S$0.0773. Revenue was up 5.9 per cent to S$766.5 million.

 

Revenue from its healthcare division grew 8.6 per cent to S$498.3 million as patients returned to clinics, while its hospital services division reported lower revenue of S$313.3 million, due to a drop in polymerase chain reaction tests carried out in the fiscal year.

 

The group&rsquo s China operations continued to be impacted by the country&rsquo s zero-Covid-19 policy. Although all three of its hospitals continued operations during the lockdowns, Raffles China Healthcare&rsquo s hospital operations faced staffing constraints and interruption to patient access.

 

Raffles Medical&rsquo s directors expect the group to remain profitable in FY2023. The group expects its core healthcare business in Singapore to continue growing and expanding while its non-core Covid-19-related business phases out.

 

&ldquo With the relaxation of Covid-19 containment policies in China, Raffles China Healthcare will benefit from the lifting of travel restrictions. Local and expatriate patients can now return to seek treatment at our China hospitals and medical clinics,&rdquo Raffles Medical added.

 

Results is around the corner: $1.92 is a street high target with most analysts&rsquo target price ranging between $1.58 &ndash 1.65.