Brokers' take: RHB raises Raffles Medical's target price to S$1.35 on Singapore's reopening plans

BSL will likely gain support for its near-term earnings amid easing restrictions and plans to reopen borders in Singapore, RHB said in a research note on Thursday.

The research team raised its target price for the healthcare group to S$1.35 from S$1.29, after it increased its earnings estimates for Raffles Medical by 3 to 6 per cent for 2021 to 2023.

RHB also maintained its "buy" call on the stock, noting that the group may be able to achieve pre-pandemic earnings levels in 2021.

Raffles Medical, which runs 15 Covid-19 vaccination centres that account for about 40 per cent of the total vaccination capacity in Singapore, will likely post strong growth due to an aggressive vaccination programme amid plans to reopen the economy.

As the restrictions on larger-scale events and gatherings ease, the group should also gain from continued and frequent Covid-19 testing until the entire eligible resident population is fully vaccinated. The group provides Covid-19 testing at its 36 clinics and was also awarded contracts to provide testing services at regional screening centres and dormitories.

Raffles Medical will likely also benefit from plans to reopen borders, since it operates clinics and provides Covid-19 testing at Changi Airport.

Additionally, the resumption of overseas travel may lead to the return of some of the group's foreign patients in 2022, which had accounted for 30 per cent of its patient load prior to the pandemic, RHB said.

The research team also expects Raffles Medical's earning growth to be boosted by local patient load in Singapore returning to pre-pandemic levels in 2021, and the group's Chongqing hospital achieving break-even in its earnings before interest, taxes, depreciation and amortisation in 2022.

RHB said the counter's valuation "looks compelling, especially amid strong estimated earnings growth", while noting that it has delivered 18 per cent returns this year and has outperformed the Straits Times Index by 7 per cent.

Shares of Raffles Medical closed unchanged at S$1.17 on Thursday.

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