Brokers' take: RHB upgrades Raffles Medical to 'buy', expects return to business as usual

RHB has upgraded Raffles Medical to "buy" from "neutral" with a higher target price of S$1.29 compared to S$0.91 previously on expectation of business returning to normal for the private medical provider.

In a report published on Wednesday, RHB analyst Shekhar Jaiswal said he expects Raffles Medical's recurring net profit to grow around 25 per cent per annum in each of 2021 and 2022.

Mr Jaiswal sees local patient load in Singapore returning to pre-pandemic level in 2021 amid the resumption of deferred appointments and elective surgeries. He added that foreign patient demand will only return in 2022.

He also sees revenue support for the group from its support of government efforts to vaccinate Singapore residents.

Mr Jaiswal's forecast for Raffles Medical for 2021 factors in a gradual reduction in government support, and likely higher staff costs, in response to the government raising salaries for healthcare worker

As for the group's China hospitals, Mr Jaiswal expects break-even in earnings before interest, tax, depreciation and amortisation (Ebitda) to be achieved in the next three to four years.

He noted that the Chongqing hospital saw improvement in patient load in the second half of last year and expects this hospital to achieve Ebitda break-even in 2022.

Mr Jaiswal pointed out that the group is looking to optimise its capital structure. He said: "The company is looking to raise debt, which will not only enable it grow faster - either organically or inorganically - but also enhance return on equity."

Shares of Raffles Medical closed flat at S$1.17 on Wednesday.