Raffles Medical Group’s Share Price is Near its 52-Week Low: Is the Healthcare Player a Bargain?


Happy days are ahead as the world finally puts the COVID-19 pandemic behind it.

Raffles Medical Group (SGX: BSL), or RMG, however, is reeling from the effects of a sharp drop in vaccinations and pandemic-related tests.

The integrated healthcare player saw its share price plunge to its 52-week low of S$1.01 recently before rebounding slightly.

At the current price of S$1.07, shares of RMG are down 23% year-to-date.

Could the healthcare player’s shares represent a bargain for investors, or could it be a value trap?

Let us dig deeper to find out.

A sharp fall in profitability

RMG did an admirable job of supporting the Singapore government in its various COVID-19 initiatives.

For 2021, the group helped operate vaccination centres that provided booster shots to the population while also participating in extensive community testing with polymerase chain reaction (PCR) tests at its test centres.

These additional activities helped RMG post a 27.4% year-on-year rise in revenue for 2021 and a 27.7% year-on-year jump in net profit to S$84.2 million.

2022 saw revenue growth slow to 5% year on year with the operation of vaccination centres tapering off.

However, RMG still managed a transitional care facility (TCF) in July 2022 to manage chronically ill patients and to alleviate the burden on the public healthcare system.

As a result, net profit soared 70.5% year on year for 2022 to S$143.5 million.

However, for the third quarter of 2023 (3Q 2023), RMG saw a sharp fall in profitability with the discontinuation of COVID-19 activities.

Revenue for the quarter declined by 24.6% year on year to S$161.6 million while net profit plunged 67.4% year on year to S$12.4 million.

Higher costs caused by inflation were also to blame for the weaker result.

The group is also rationalising its China operations to achieve better efficiencies but is continuing to operate the TCF at the Expo till February 2025.

Despite the poorer result, the group generated a healthy positive operating cash flow of S$174.3 million for the first nine months of 2023 and maintained a net cash balance of S$239.7 million as of 30 September 2023.

Gestation period required

The results are a setback for the integrated healthcare group as it seeks to grow its business.

However, investors should note that the fall in net profit is temporary and a result of a sharp drop-off in pandemic-related revenue.

RMG opened two hospitals in China in the last five years – a 700-bed hospital in Chongqing back in January 2019 and a 400-bed hospital in Shanghai in July 2021.

The group also upgraded its Beijing clinic into a hospital in 2020 by doubling the space and bringing in operating theatres.

The COVID-19 pandemic disrupted patient flow in these hospitals as periodic restrictions hampered these healthcare institutions from achieving their full potential.

RMG reported that revenue has improved for 3Q 2023 but both hospitals remain in the development phase and will continue to incur gestational losses.

The original breakeven period has also been lengthened because of the pandemic and RMG will need more time to right-size operations to eventually achieve profitability.

Business development efforts

To mitigate the fall in medical tourism and COVID-19-related revenue, RMG has also undertaken business development efforts to increase its revenue streams.

Back in August 2022, the healthcare group received approval to set up an in-vitro fertilisation and assisted reproduction therapy centre in Hainan, China.

This facility will complement RMG’s three hospitals in China and help to serve the estimated 40 million women who may reproductive fertility services.

Back in October this year, RMG announced its foray into Vietnam with the acquisition of a majority interest in American International Hospital in Ho Chi Minh City.

This hospital was completed in 2018 and is a fully-equipped 120-bed tertiary hospital.

CEO Loo Choon Yong was quoted in September as stating that RMG has been growing non-stop for 47 years, so why should the group stop now?

This implies that he has set his sights on further expansion with the latest Vietnam acquisition being an example.

Get Smart: Short-term pain, long-term gain

RMG will inevitably go through short-term pain as it sees its pandemic revenue fall off a cliff.

Its three China hospitals are also incurring gestational losses as they slowly ramp up patient numbers.

However, RMG appears to have bright prospects.

Its new therapy centre in Hainan, along with its newly acquired hospital in Vietnam, should start contributing positively to revenue and earnings next year.

With medical tourism recovering and its China hospitals edging closer to breakeven, it is a matter of time before the integrated healthcare player sees its profit heading higher.

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Disclosure: Royston Yang owns shares of Raffles Medical Group.





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