• A recent MOU was signed with China Life Healthcare Investment, allowing Raffles Medical (SGX:BSL)’s operations in China to have collaboration across the provision of medical services and healthcare financing. This could see continued investment into China while a potential medical financing collaboration with China’s largest life insurer would be a positive in our view.
• On the home front, sustained testing as well as vaccination services will likely keep 2021 earnings elevated.

What’s New

Strategic partnership with China Life Healthcare Investment Company Limited (CLHI), a subsidiary of China Life Insurance.

• An MOU was signed with CLHI, which will allow collaborations and initiatives across a variety of areas for Raffles Medical Group’s operations in China, including provision of medical services, healthcare management, training and development as well as healthcare financing through insurance, with a focus on supporting aging populations.

Continued investment and commitment to China.

• Expansion into China has been centric for Raffles Medical Group, through its Raffles Hospital Chongqing (opened in 2019), newly refurbished medical intensity for more expensive medical treatments.

Ramping up testing and vaccinations for COVID-19.

• The Singapore authorities have also recently note the difference in price points for PCR tests compared with lower cost alternatives.

Living with an endemic.

• Raffles Medical Group conducted over 600,000 COVID-19 tests, screened more than 6m proxy for continued healthcare services as the COVID-19 situation evolves into an endemic.

Stock Impact

Moving parts.

• Certain COVID-19 initiatives are expected Raffles Hospital is part of the Emergency Care Collaboration scheme, which allows it to admit emergency patients at subsidised rates, and could support patient volumes during the Phase 2 period.

Earnings Revision / Risk

Raise earnings forecasts by 8-10% for 2021-23.

• Assuming normal operations for 2020 are affected by approximately 15%, we estimate that COVID-19-related contribution to Raffles Medical Group amounts to approximately S$100m-120m in the loss of grant support in 2021. We have not factored in a substantial increase in air border screening service yet, which could provide further upside.

Valuation / Recommendation

• Maintain BUY on Raffles Medical Group with a higher peers’ average P/E of 45x 2021F, as well as below its 5-year mean EV/EBITDA of 21x.

Share Price Catalyst

• Potential catalysts include:
  1. faster-than-expected ramp-up of the new specialist centre;
  2. better-than-expected ramp-up of new hospitals in China; and
  3. recovery in foreign patient load.

Source: UOB Kay Hian Research - 11 Jun 2021