Raffles Medical (SGX: BSL) shares are down 12% today on the announcement of falling turnover and profits. This shouldn’t be all that much of a surprise for BSL shares for of course covid activities have been unwinding recently. Indeed, the share price movement is understated compared to the changes in revenue and profits. The reason being? The market already expected there to be this fall, it was just slightly larger than expected.
The business line at Raffles: “Raffles Medical Group Ltd provides integrated private healthcare services primarily in Singapore, Greater China, Vietnam, Cambodia, and Japan. The company operates through Healthcare Services, Hospital Services, and Investment Holdings segments. Its Raffles Hospital, a tertiary care hospital that offers a range of medical and surgical facilities include day angiography suites, operating theatres, delivery suites,” etc.
Covid meant a large expansion of activity: “The results were dampened by a discontinuation of Covid-19 activities, while cost inflation also eroded margins, said the company on Monday. “The group’s core operations in Singapore remain strong and profitable,” said Raffles Medical.” Effectively we’ve seen an unwind of the expansion undertaken specifically - and at government request of course - to deal with covid’s demand upon medical facilities.
Raffles Medical share price from Google Finance.
As we can see from that share price over time this is not unexpected.
But it also seems to have been a bit more than the average expectation: “Raffles Medical Group posted a 67.4% YoY lower profit after tax of $12.4m in 3Q23. The healthcare company’s revenue likewise declined in 3Q23, dropping 24.6% YoY to $161.6m. In a bourse filing, Raffles Medical attributed the moderation in its financial performance to the “discontinuation of COVID-19 activities,” which affected the profitability of its Singapore operations.Cost inflation likewise eroded the company’s margin.”
The unwind of covid, sure, we could see that coming. The decline in margins on the core business as a result of cost pressures is both less welcome and more unexpected.
That core business in Singapore is pretty mature. It’s the expansion in China that’s likely to produce any above market growth rate - and that’s still in the investment phase so it’ll take a bit of time before we see how that works out