Normalised to pre-COVID levels
- FY23 net profit fell 37% y-o-y to S$90.2m, in line. 2H23 net profit -63% y-o-y to S$30m, 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
- Management remains confident on China ramp-up; managing additional 176 TCF beds at Raffles Hospital
- Maintain HOLD; TP of S$1.00; declared 2.4 Scts FY23 dividend vs. 3.8 Scts in FY22
2H23 results saw normalisation to pre-COVID levels; declared 2.4 Scts FY23 divided, 49% of net profit (vs. 3.8 Scts in FY22).
- 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 FY23. 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 growing 37% y-o-y and 41% y-o-y to S$191m and S$24m, respectively.
- On the other hand, the healthcare division, with the absence of COVID-19-related services, saw performance normalise, with revenue and PBT falling 55% y-o-y and 91% y-o-y to S$122m and S$9m, respectively.
- Aside from the decline in the healthcare division, Raffles Health Insurance (RHI) recorded operating loss of S$7m, vs. S$0.5m profit in FY22, despite delivering higher revenue of S$145m, +26% y-o-y. The higher loss ratio, which impacted its operating loss, was in line with industry trends.
- Declared FY2023 final core dividend of 2.4 Scts, 49% of net profit. While revenue from China saw 18% y-o-y growth, signalling normalisation, gestational losses continue to weigh on performance and profitability.
Key highlights from results briefing
- Management believes that 2H23 operations have normalised and that it will likely return to growth from these levels.
- Raffles Medical has renewed its Transitional Care Facilities (TCF) at Expo, with 200 beds until Feb 25, and is managing an additional 176 TCF beds at Raffles Hospital.
- While TCF contract margins are lower, management believes the project-based contribution recognition could be volatile depending on the timing and bed utilisation.
- As such, the EBITDA margin remains moderated, given lower margins from TCF and management maintaining some (c.20%) of contract/part-time staff for a potential emergency or spike in the hospital load.
- Its China hospitals continue to gain traction and reputation among expatriates and local communities but remain in a gestational period. Management maintains its guidance of EBITDA breakeven in three years from FY23 (first year of operation). Management highlighted that the EBITDA losses have been on track with guidance, that it is prudently confident that the ramp-up in momentum is gaining traction, and it is optimistic about its growth trajectory.
- Management is reviewing its plans on the Hainan Obstetrician & Gynecology (including IVF) facility.
- On the subject of expansion, management has acquired its 49%-JV partner for its Osaka clinic and plans to expand into Fukuoka by mid-year and Tokyo subsequently.
- Following its recent partnership/potential acquisition of American International Hospital (AIH in Ho Chi Minh City, management continues to explore new business opportunities in Vietnam.