3Q2023 Results Analysis: A soft quarter
- 9M23 PAT fell 26% y-o-y to S$72.8mn, 53% of our FY23 estimates. 3Q23 performance fell 67% y-oy to S$12.4m and 9% below that of 3Q19, moderated more-than-expected after a high base in FY22.
- While Singapore core operations remain strong, management attributed earnings moderation to discontinuation of COVID-19 activities, cost inflation, gestation losses from China and higher claims from its insurance arm.
- Operationally, TCF contract has been extended to Feb25 and management will right-size China operations for better efficiencies.
- We currently have a HOLD rating; TP of S$1.48. Normalisation post a stellar year in FY22 was within our expectations.
Raffles Medical’s 3Q23 performance moderated more-than-expected after delivering an exceptionally stellar year in FY2022 which forms a high base. 3Q23 PAT fell by 67% y-o-y to S$12.4m and 9% below that of 3Q2019. 9M23 PAT fell 26% y-o-y to S$72.8m, 53% of our FY2023 estimates. While Singapore core operations remain strong and profitable, discontinuation of COVID-19 activities, cost inflation and gestation losses from China continue to weigh down on performance and profitability. In addition, RafflesHealthInsurance (RHI) registered higher claims in 3Q23. No further financial / operational numbers were disclosed for now as this is a business update.
Operationally, Raffles Medical’s contract to manage the Transitional Care Facilities (TCF) at Expo has been extended to Feb 2025. Management has highlighted that it will right-size and rationalise its China operations to achieve better operating efficiencies. We currently have a HOLD rating; TP of S$1.48. Given the exceptionally strong earnings posted in FY22, 9M23 earnings appears to have normalised, as per our expectations previously. Nevertheless, we remain long-term positive on Raffles Medical, led by the long-term positive trend of the healthcare industry and potential ramp-up of its China hospitals as it reaches stabilisation and breakeven in the medium term.
More details after the briefing.