The Positives
+ Spike in healthcare services earnings. 2H22 PBT for healthcare services more than doubled to S$97.8mn. The jump was due to higher GP visits as re-opening saw a jump in non-COVID infections. In addition, patients with COVID-19 symptoms preferred GP visits rather than hospitals. Increased volumes boosted operating leverage for the business.
+ Return of foreign patients. With borders re-opening, revenue from foreign patients has returned to close to pre-pandemic levels. Such patients have higher revenue intensity and better margins. We expect the return of foreign patients to continue into 1H23. We believe foreign patient revenue has surged back to around 20% of revenue. This is below the estimated 25-30% pre-pandemic.
+ Jump in FCF*. In line with the record earnings, FCF rose 51% to a record S$183mn for FY22. Capital expenditure should normalise to S$30mn-35mn after the major ramp-up of the past 3 years for the new hospitals in China. Net cash has doubled from S$90.7mn to S$180mn. FY22 dividend was increased by 36% to 3.8 cents.
*Free cash flow = Operating cash-flow less Capex less Lease payments
The Negative
+ Losses in China hospitals. EBITDA losses in China were larger than expected due to the lockdown. There was vaccination work, but revenue was low. The decline in foreigners was another negative, especially for the Beijing hospital. We expect S$10mn EBITDA loss per hospital for Chongqing and Shanghai.
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Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.
