Rebooting medical tourism
Medical tourism on the mend
Based on our channel checks, foreign patients have been streaming into Singapore since Apr 2022, when the border restrictions were mostly eased with extra flights added, and the removal of entry approval requirements. While no official data was released by the relevant authorities, most healthcare providers are anecdotally seeing more patients from regional countries such as Indonesia, Malaysia, Cambodia, India, Vietnam and Laos. Even though the numbers are still below pre-Covid levels (~60% based on
RFMD disclosure), we are optimistic this trend will continue to rise in the coming months.
SG remains key destination for complex treatments
Prior to the pandemic, medical tourist arrivals in Singapore were estimated at around 500,000 a year. As many as 250k-300k come from Indonesia alone, followed by Malaysia and China. Historically, we understand that foreigners make up roughly 30% of the volume load at RFMD’s flagship hospital. Management expects foreign patient numbers to improve when China relaxes its quarantine requirements, possibly by the end of the year. This would further increase the group’s revenue intensity given its average bill size can be up to 2-3 times higher than local patients as they usually come for more complicated surgeries/electives.
…Despite intense regional competition
Singapore faces keen competition from neighbouring countries such as Malaysia and Thailand. While they may not have the state-of-the-art facilities and well-trained medical specialists that local hospitals possess, they can carry out standard surgery at a fraction of the cost. The strong SGD vis-à-vis regional currencies also makes Singapore less affordable. But Singapore should retain its position as a high-end medical tourist destination, attracting wealthy patients who are not so cost-conscious. In our view, this benefits private healthcare providers like RFMD with its Group Practice Model that allows doctors to take a collaborative approach
RFMD is our preferred pick in the sector
Overall, we maintain our POSITIVE stance on the Singapore Healthcare sector. Our preferred stock pick is RFMD (BUY, TP: SGD1.57) on the back of its integrated & multi-disciplinary services, and a potential beneficiary of “Healthier SG” strategy given its extensive primary care network. Meanwhile, we downgrade QNM to HOLD on a lower TP of SGD0.40 due to the near-term earnings gap from significant reduction in PCR tests. While the group is focusing on the organic expansion of new dental clinics, we
reckon this is likely to take some time to bear fruit given the usual gestation period of one year.