MAYBANK on Monday (Sep 26) highlighted Singapore’s healthcare sector as a defensive play amid the uncertainty caused by “red hot” inflation and ratcheting interest rates.

It remains “positive” on the sector, as it sees medical tourism on the mend, according to channel checks which indicate the return of foreign patients.

Maybank’s preferred stock is Raffles Medical Group : BSL 0%, given its integrated and multi-speciality services. The group is also a potential beneficiary of the Singapore government’s upcoming “Healthier SG” initiative, which will benefit players with large, primary care networks.

It has a “buy” call, and an unchanged target price of S$1.57 on Raffles Medical, implying a potential upside of 18 per cent from the counter’s last trading price of S$1.33 as at 11.48 am on Monday. Raffles Medical shares were flat at the time.

Meanwhile, Maybank has downgraded Q&M Dental Group : QC7 0% to “hold” from “buy” due to a near-term earnings gap from the significant drop in polymerase chain reaction (PCR) tests.

“While the group is focusing on the organic expansion of new dental clinics, we reckon this is likely to take some time to bear fruit given the usual gestation period of one year,” said Maybank analyst Eric Ong.

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The research team has also nearly halved its target price on Q&M Dental to S$0.40 from S$0.78, after rolling forward its valuation to an FY2023 price-to-earnings ratio of 20 times.

The new target price implies a potential upside of 11.1 per cent from the counter’s last trading price of S$0.36 as at 11.48 am on Monday. Q&M dental was down 1.4 per cent or S$0.005 at the time.

The group posted a “disappointing” Q2 net profit due to the sharply lower-than-expected contribution from PCR tests, Maybank noted.

On Aug 14, Q&M Dental posted a 60 per cent drop in net profit for the 3 months ended Jun 30, while revenue was down 13 per cent to S$44.1 million. Earnings had suffered more due to negative operating leverage amid current inflationary pressures.