Raffles Medical to benefit from further border reopening, says RHB

Raffles Medical is the sole provider of Covid-19 polymerase chain reaction tests for post-arrival air travellers into Singapore.
Raffles Medical is the sole provider of Covid-19 polymerase chain reaction tests for post-arrival air travellers into Singapore.PHOTO: RAFFLES MEDICAL GROUP

SINGAPORE (THE BUSINESS TIMES) - Raffles Medical, the sole provider of Covid-19 polymerase chain reaction tests for post-arrival air travellers into Singapore, should benefit from the further reopening of the Republic's borders, RHB said on Monday (Oct 11).

Singapore will soon launch nine more vaccinated travel lanes (VTLs) from October onwards, on top of two existing VTLs with Germany and Brunei.

The VTLs, coupled with the conversion of the Singapore Expo's Connect @ Changi facility - run by Raffles Medical - into a dedicated Covid-19 treatment facility, should support near-term revenue growth for the healthcare operator, RHB said.

Covid-19 treatment facilities help to augment hospital capacity that is needed by vulnerable cases such as the elderly. The Health Ministry has added 1,200 beds across five of such facilities so far.

Moreover, the return of the healthcare provider's patients to its clinics and some foreign patients to Singapore, along with its Chongqing hospital breaking even in fiscal year 2022, should drive earnings for the next year.

RHB has raised its target price for Raffles Medical to $1.65 from $1.45 and maintained its "buy" call on the stock. This implies an upside of about 14 per cent from the counter's Monday trading price of $1.45 as at 9.50am. The counter was down 2 per cent or three cents at the time.

The target price of $1.65 is 39 times RHB's financial year 2022 earnings forecast for Raffles Medical, which is in line with the price-to-earnings multiple for Asean healthcare operators. The research team also raised its 2021-2023 profit estimates by 5 per cent to 13 per cent.

From Oct 19, Singapore will launch eight VTLs with countries in Europe and North America - namely, Canada, Denmark, France, Italy, the Netherlands, Spain, Britain and the United States.

This is on top of an upcoming VTL with South Korea that will take to the skies from Nov 15. The latest additions will expand the existing pool of VTLs, which presently comprises Germany and Brunei, from two to 11.