Healthcare stocks are generally favoured as structural growth stories. “The globally ageing population theme, which Singapore is also experiencing, will also see higher demand for healthcare services and products, and this in turn will benefit several of the healthcare providers listed on the Singapore market,” says OCBC Group Research.
However, as investors here would observe, healthcare stocks here, including Raffles Medical, have their ups and downs. For one, during the thick of the pandemic, the likes of Raffles Medical were drafted to provide additional services, and earnings spiked over those couple of years as a result. In what is supposed to be the post-pandemic normalisation phase, investors’ attention was then drawn to costs incurred by Raffles Medical to get its hospitals in China up and running.
Raffles Medical’s share price, since its recent peak of $1.07 in February, has dropped more than 13% as investors ponder its slowing growth. Yet, from the perspective of Shekhar Jaiswal of RHB Bank Singapore, this recent de-rating is “an attractive entry point” ahead of the company’s 1HFY2026 earnings to be reported later this month.
Specifically, Jaiswal will be looking for better data points on whether Raffles Medical remains on track to achieve its ebitda breakeven target for at least one China hospital by the end of this year, and if the new Integrated Shield Plan rider regulations will be structurally positive for its insurance unit, Raffles Health Insurance.
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Meanwhile, Jaiswal, who has kept his “buy” call and $1.30 target price, notes that Raffles Medical trades at a discount to its Asean healthcare peers despite strong earnings visibility. Besides its home market of Singapore, Raffles Medical has bet big on China, which now accounts for 31% of its non-current assets but contributes just 9% of total revenue, underscoring opportunities to improve asset productivity.
Jaiswal points out that its Beijing hospital is already profitable, while Shanghai and Chongqing remain in the ramp-up phase.
Raffles Medical, according to the analyst, has expanded its addressable market beyond expatriates to include China’s affluent domestic population, the top 30% of consumers seeking premium healthcare.
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“With a target for at least one China hospital to achieve ebitda breakeven by the end of 2026, 1HFY2026 results should provide a key read-through on revenue growth and narrowing operating losses,” says Jaiswal.
Here in Singapore, the healthcare industry is seeing changes from reforms to the insurance system, with effect from April 1, forming what Jaiswal calls “an overlooked earnings catalyst”.
“We believe the market underestimates the earnings upside from the Ministry of Health’s Integrated Shield Plan rider reforms for Raffles Health Insurance,” says Jaiswal. As it is, losses have already narrowed materially through stronger claims discipline, with the business approaching breakeven in 2HFY2025.
Jaiswal believes that the reforms should structurally improve industry claims ratios through higher patient co-payments, broader insurance affordability and support premium growth and operating leverage.
The new policies aim to curb steep premium increases but also impose a higher share of out-of-pocket costs on patients, thereby tempering demand for private hospital care.
However, Jaiswal believes there will be limited impact on Raffles Medical’s Singapore hospital operations given its extensive insurer panel, demand driven by genuine medical needs, and transitional grandfathering provisions, under which existing riders remain unaffected until policy renewals after April 1, 2028.
“This should allow any demand adjustment to occur gradually, while Raffles Medical could also gain panel share as insurers increasingly favour cost-efficient providers,” he adds.
Meanwhile, Raffles Medical can choose to flex its balance sheet, with options ranging from overseas acquisitions to further share buybacks to maintaining dividend payouts.
“The debate is not financial capacity but capital allocation discipline. Investors may favour buybacks and dividends unless it can demonstrate that regional expansion, including potential opportunities in Vietnam, is earnings-accretive and avoids the prolonged gestation seen in China,” says Jaiswal.
