Analysts raise targets on healthcare plays Raffles Med, Q&M as Covid-19 testing, vaccinations ramp up

TWO brokerages have raised their respective earnings forecasts for BSL and QC7 as they consider these healthcare plays well-poised to capture opportunities presented by Covid-19.

In a report on Friday, UOB Kay Hian (UOBKH) reiterated its "buy" call on Raffles Medical Group with a higher target price of S$1.27 compared to S$1.12 previously to factor in 8 to 10 per cent higher earnings forecasts for FY2021 to FY2023.

In the view of UOBKH's analysts, the stock is set to benefit from increasing Covid-19 testing in Singapore and an accelerated rate of vaccinations administered over the next few months.

"We opine that the sustained need for testing as well as continual screening for travellers will enable Raffles Medical to be a proxy for continued healthcare services as the Covid-19 situation evolves into an endemic," said the analysts.

They are expecting such Covid-19 related contributions to also help to offset a loss of government grant support in 2021.

The brokerage is also positive on Raffles Medical's recently announced partnership with a subsidiary of China Life Insurance (Group), which will allow collaborations and initiatives across a variety of areas for Raffles Medical's operations in China.

"A potential collaboration in healthcare financing could enable Raffles Hospital in China to be on the medical panel of China Life's medical insurance network, which we opine could aid billing intensity for more expensive medical treatments," noted its analysts.

On the other hand, KGI Securities has raised its price target for Q&M Dental to S$0.91 from S$0.54, while maintaining "outperform" on the dental service company.

Noting a "surprisingly strong" maiden contribution from Acumen Diagnostics for Q1 of FY2021, its analyst Joel Ng said he is confident on the medium-term outlook of the group's 51 per cent subsidiary, which is mainly involved in the manufacture, sale and distribution of diagnostic test kits for Covid-19.

"Q&M continues to generate stable and resilient earnings, and we foresee no material changes in or threats to its market share in the private dental space in the medium term," said Mr Ng.

"Overall, Singapore continues to be the main revenue driver as a significant proportion of Q&M's sales are generated by the local segment. With Q&M's plans on expanding its network, we expect resilience in future years via gaining greater market share," he added.

Shares of Raffles Medical closed at S$1.15 on Friday, up 0.88 per cent, while Q&M was up by 2.96 per cent to S$0.695.