Broker's take: RHB says Raffles Medical price weakness a chance to accumulate

RHB on Wednesday (Nov 3) said Raffles Medical's BSL recent share price weakness is an opportunity to accumulate. It maintains Covid-19 testing and Covid-19 treatment facility management to be a near-term revenue driver.

The mainboard-listed healthcare provider's share price has dropped 11 per cent from recent highs amid investor concerns over revised on-arrival polymerase chain reaction test requirements for travellers arriving in or transiting through Singapore, RHB noted.

The research team has a "buy" call on the stock and a target price of S$1.65, which represents an upside of 21.3 per cent based on the counter's trading price of S$1.36 as at 10.14 am on Wednesday. Raffles Medical was down 0.7 per cent or S$0.01 at the time.

The target price is based on a discounted cashflow-based fair value of S$1.62 and an environmental, social, and corporate governance premium of 2.2 per cent. It is also 39 times RHB's FY2022 earnings estimate, which is in line with the price-to-earnings multiple for Asean healthcare operators, RHB noted.

It added that Raffles Medical is trading below peer average EV/Ebitda multiples. The healthcare provider's valuation is also compelling, amid strong estimated earnings growth.

"Our investment thesis remains entrenched on normalisation of Raffles Medical's local businesses and China hospital operations' 2022 revenue contributions," the research team said.

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