FY2023 Results Analysia: Normalised to pre-COVID levels
- FY23 net profit fell 37% y-o-y to S$90.2mn, in line with our FY23 estimates. 2H23 net profit -63% y-o-y to S$30m has normalised close to pre-COVID levels.
- Hospital division remained strong while healthcare division was impacted by the absence of COVID-19 related services. 2H23 EBTIDA margin declined to 17% vs 26% in 1H23.
- China saw revenue growth but remains in gestation period. Management is prudently confident of the hospitals’ growth trajectory; Continue to look for new opportunities regionally post partnership / potential acquisition of AIH Hospital in Vietnam
- Maintain HOLD rating; TP of S$1.00. Declared 2.4 Scts FY23 dividend. Normalisation post a stellar year in FY22 was within our expectations.
What happened?
Raffles Medical’s FY23 net profit fell 37% to S$90.2m (in line with our estimates) as performance moderated post COVID coupled with a high base from an exceptionally stellar year in FY2022. 2H23 Revenue and net profit fell 13% y-o-y and 63% y-o-y to S$336m and S$30m respectively. FY23 EBITDA margin fell to 20.7% vs 21.6% in FY22. 2H23 EBITDA margin declined to 17.2% vs 33.6% in 2H22 and 25.8% in 1H23. 2H23 Hospital division remained strong with revenue and PBT grew 37% y-o-y and 41% y-o-y to S$191m and S$24m respectively. On the other hand, healthcare division, with the absence of COVID-19 related services, saw performance normalised with revenue and PBT fell 55% y-o-y and 91% y-o-y to S$122m and S$9m respectively. Aside from the decline in healthcare division, RaffelsHealthInsurance (RHI) recorded operating loss of S$7m vs S$0.5m profit in FY22 despite delivering higher revenue +26% y-o-y to S$145m. The higher loss ratio which impacted its operating loss was in lines with industry trends. Declared FY2023 final core dividend of 2.4 Scts (-37% y-o-y) vs 3.8 Scts in FY22. Payout ratio of 49% of net profit. While revenue from China saw 18% y-oy growth pose normalisation, gestational losses continue to weigh down on performance and profitability.
Our View
Operationally, Raffles Medical’s continue to manage the 176-bed Transitional Care Facilities (TCF) at Expo until Feb 2025. Its China hospitals continue to gain traction and reputation from expatriates and local communities but remained to be in gestational period. Management is prudently confident of the hospitals’ growth trajectory. Following its recent partnership / potential acquisition of American International Hospital (AIH Hospital) in Ho Chi Minh City, management continues to explore new business opportunities regionally. We maintain our HOLD rating; TP of S$1.00. Given the exceptionally strong earnings posted in FY22, FY23 has normalised closed to pre-COVID levels, as per our expectations. 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.