CGS-CIMB Research analyst Tay Wee Kuang is keeping his "add" call on Raffles Medical Group BSL (RMG) with an unchanged target price of $1.20, as December 2023 saw communicable disease infections peak for 2023.
Singapore's Ministry of Health (MOH) estimates average daily Covid-19 infections reached a 2023 peak of 8,300 cases per day, with polyclinic attendances for acute respiratory infections (ARIs) also reaching a 2023 peak of 3,600 cases daily in December 2023.
CNA reported on Dec 27, 2023 that the current wave of Covid-19 infections has seen patient loads at RMG increase 30-50% during the December period across its hospital and clinic network in Singapore, with other private clinic operators such as Healthway Medica and Fullerton Healthcare also experiencing higher patient loads.
With the rise in Covid-19 cases, hospitalisation from Covid-19 infections had also risen. To preserve the capacity of public hospitals, MOH, on Dec 16. 2023, converted the Transitional Care Facility (TCF) at Changi Expo Hall 10 into a Covid-19 treatment facility (CTF) with 40 beds for Covid-19 patients.
According to the government tender site GeBIZ, RMG will manage Halls 9 and 10 of
Changi Expo until February 2025, and can be called upon by MOH to run the halls as a TCF or CTF. "Operating a CTF should be more profitable for RMG considering the drastic 67.4% y-o-y decline in its 3QFY2023 ended September profit after tax, when the facility was operating as a TCF instead of a CTF," says Tay.
With that said, Tay thinks the higher patient load and outpatient attendance in 4QFY2023 supports his forecast of 9.1% net profit growth q-o-q to $13.5 million for 4QFY2023 with potential surprise on the upside due to the conversion of the Hall 10 TCF into CTF.
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"However, we keep our estimates unchanged due to the lack of visibility on the facility’s operations," says Tay, who has estimated that RMG’s overall profitability should also remain below FY2021-FY2023 levels in FY2024 given the high-base effect due to melt-off in contribution from Covid-19-related services since 2HFY2023.
As at 9.55am, shares in RMG are trading 0.9% higher at $1.07.
