RAFFLES Medical Group Raffles Medical: BSL -0.76% on Monday (Feb 21) announced that its net profit for the second half ended Dec 31, 2021 has dipped by 8.1 per cent to S$44.7 million, from S$48.6 million in the year-ago period.

 

This was attributed to higher tax expenses for H2 FY2021, as the period' s earnings before interest, taxes, depreciation and amortisation (Ebitda) had grown 4.9 per cent year on year to S$86.1 million from S$82.1 million, and H2 FY2020' s Ebitda had included S$9 million in Jobs Support Scheme grants received, which is not subject to tax.

 

Earnings per share for H2 FY2021 also declined by 9.1 per cent to S$0.0239, from S$0.0263 in H2 FY2020.

 

The board has recommended a final dividend of S$0.028 for FY2021, comprising a core dividend of S$0.018 and a special dividend of S$0.01, subject to shareholder approval at the next annual general meeting.

 

It had previously stated its intention to consolidate its interim and final dividends into an annual core dividend of up to half its average sustainable profit after tax and minority interests, starting in FY2021. An earlier guidance stated that the total FY2021 dividend would be " not less than S$0.025" .

 

Despite the drop in net profit, the private healthcare provider posted a H2 revenue jump of 16.3 per cent year on year to S$380 million, from S$326.8 million, due to the sale of Covid-19-related products and services.

 

It also noted that revenue for its healthcare services grew by 61.3 per cent in H2 FY2021, whereas its H2 FY2021 hospital services' top line went down by 6.2 per cent, both compared to the previous year. The group attributed this to Raffles Medical' s resources being deployed to support the various Covid-19 initiatives of the government, such as through the operation of vaccination centres and community testing.

 

Staff costs also dented earnings in the second half of last year, rising 31.7 per cent to S$204.1 million. Dr Loo Choon Yong, executive chairman of Raffles Medical Group, said that the company has 4,000 part-timers that it can supplement its workforce with when there are surges in demand due to Covid-19.

 

He also noted that productivity has gone down as the group deals with fluctuating Covid-19 demand, while regular patients avoid hospitals and clinics during the pandemic.

 

For the full-year FY2021, revenue went up 27.4 per cent year on year to S$723.8 million from S$568.2 million, which was matched by a 27.7 per cent year on year increase for net profit to S$84.2 million from S$65.9 million.

 

Looking forward, the group said it expects to remain profitable in FY2022 based on current circumstances and barring unforeseen circumstances, despite its Covid-19 support activities tapering off as the pandemic " evolves" .

 

Dr Loo said that demand for tests will remain for some time as more Singaporeans get tested to travel abroad. As more travellers enter Singapore, Raffles Medical Group will also continue administering tests to them at Changi Airport.

 

He also expects regional patients to return as international travel resumes, although demand remains uncertain.

 

&ldquo It&rsquo s a matter of pricing, it&rsquo s a matter of whether they now have renewed comfort, they&rsquo ve found local providers whom they&rsquo re comfortable with.

 

&ldquo I believe that Singapore will continue to be a hub because of quality and high standards so it may well be that total numbers may not be as great as before but the more seriously ill, the upper segment of the market will gravitate to Singapore,&rdquo he said.

 

Already, he noted that the government has, on a case-by-case basis, allowed foreign patients to enter for more serious medical operations like bone marrow transplants.

 

The group is also cautiously optimistic that its hospitals in China will continue to see improved patient loads.

 

Dr Loo said: " With Raffles Hospital Shanghai operational, we now have hospitals in 3 major cities in China. With this addition to our network of medical facilities and services in the region, we can serve even more local and international patients with our Raffles brand of quality healthcare services."

 

As for the group&rsquo s growth areas, Dr Loo noted that Finance Minister Lawrence Wong signalled in his Budget 2022 speech that partnerships between healthcare clusters and community partners should be improved, while preventive healthcare will also receive more attention.

 

&ldquo In my view as a healthcare expert, it makes sense that we can serve our ageing population more cost effectively&hellip the same item of care (in the community) is cheaper than in an acute hospital.

 

&ldquo Post-Covid, people are more interested in wellness, being healthy so that they will be strong against not just Covid-19, but other illnesses and I think that&rsquo s good,&rdquo he said.

 

In their research report on Feb 21, OCBC Investment Research analysts said that net profits, revenue and Ebitda were all above consensus expectations. It also maintained " buy" on the company with a fair value of S$1.65.

 

The analysts also said that the gradual regional re-opening of borders should be supportive of the group' s medium term recovery as foreign patients return.

 

" Overall, we see the incremental easing of travel restrictions, improving regional mobility and confidence to travel as supportive factors for Raffles&rsquo medium term earnings outlook," they said.

 

Additionally, the analysts noted that the group' s hospitals in China have continued to see improving traction, with management guiding for Raffles Chongqing to breakeven by the end of 2022 and Raffles Shanghai to see Ebitda breakeven 3 years from its commencement in the fourth quarter of 2021.

 

DBS analysts also noted that the company' s financial results were one of its best ever and exceeded their expectations as well. They maintained " buy" on the counter with a fair value of S$1.81.

 

Still, they noted that a key downside could be that hospital services revenue fell 6 per cent year-on-year in the second half of the year.