A Better Healthcare Stock To Buy: Raffles Medical Group Ltd Vs. Singapore O&G Ltd (Part 3)
- Original Post from The Motley Fool Sg

Healthcare companies are generally considered as defensive stocks since their services are needed when the economy’s good as well as bad. The defensive nature of their businesses also makes healthcare companies attractive to investors.

There are many healthcare companies in Singapore’s stock market and you might want to know which is a better investment opportunity. There’s no easy answer, but I want to directly compare the important business and valuation aspects of two healthcare services providers –Raffles Medical Group Ltd (SGX: BSL)andSingapore O&G Ltd (SGX: 1D8)– in a mini article-series.

This article is the third and last in the series and it compares the valuations of the two healthcare companies. In particular, the valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield. Myfirst article in the seriescompared the most recent quarterly earnings updates of the pair, while thesecond articlelooked at their long-term track record of growth.

The business

Raffles Medical is a leading integrated private healthcare provider in the region. In Singapore, it has a large network of clinics and medical centres, in addition to its flagship Raffles Hospital, which provides tertiary medical care. The company also has medical facilities beyond Singapore in 12 cities across China, Japan, Vietnam, and Cambodia. The medical facilities in China include two hospitals that Raffles Medical is developing in Chongqing and Shanghai; the hospitals are expected to be completed in the fourth quarter of 2018 and the second half of 2019, respectively.

Meanwhile, Singapore O&G is a specialist healthcare services provider that has a focus on women’s health. The company has four business arms: Obstetrics and Gynecology; Cancer-related; Pediatrics; and Dermatology. Singapore O&G sources all its revenue from Singapore at the moment.

The showdown

The table below shows the valuations of the two healthcare companies as of 22 October 2018:

Company PB ratio PE ratio Dividend yield
Raffles Medical 2.45 25.00 2.16%
Singapore O&G 3.56 14.77 4.97%

Source: SGX Stock Facts

Looking at the table above, I think it’s clear that Singapore O&G is the cheaper among the two due to its lower PB and PE ratios.

The Foolish conclusion

As a recap, it was Singapore O&G that had the best performance when I compared the two healthcare companies’ most recent quarterly earnings updates in my first article in the series. It was also Singapore O&G with the better report card for long-term growth, as discussed in my second article. And as we’ve just seen, Singapore O&G is again the company with the best valuation. So, Singapore O&G has emerged as the winner by coming out ahead in all three of my criteria.

But with all the above been said, investors are reminded that the information presented in the series is by no means a recommendation to take any action on Raffles Medical and Singapore O&G. Instead, the information should be viewed only as a useful starting point for further research.

$Singapore O&G(1D8.SI) $Raffles Medical(BSL.SI)

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The Better Buy: Raffles Medical Group Ltd or Singapore Medical Group Ltd?
- Original Post from The Motley Fool Sg

There are around 700 companies listed on the stock exchange in Singapore. Of those, there are a number of companies that have similar business operations. It is sometimes difficult to determine which company in a particular industry is better than its peers.

To make your life simpler, I will do some quick-and-dirty comparisons between two companies operating in the healthcare sector, Raffles Medical Group Ltd (SGX: BSL) and Singapore Medical Group Ltd (SGX: 5OT), to determine which might give you a better bang for your buck.

Introduction of the companies

Raffles Medical Group (RMG) is the largest integrated private healthcare group in Singapore. Established in 1976, it now has a presence in 13 cities across Asia, serving more than two million patients.

Meanwhile, Singapore Medical Group (SMG), which was started in 2005, is a primary healthcare provider with a network of more than 20 medical specialties. Its clinics are located in places such as Paragon, Mount Elizabeth Novena Specialist Centre, Parkway East Medical Centre, and Gleneagles Medical Centre.

The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as of the closing share prices on 4 March 2019.

Do note that all figures quoted in the tables that follow are for the full year ended 31 December 2018 for both companies, unless otherwise stated.

Round 1: Profitability

In the first round, we will analyse the profitability of the companies in terms of net profit margin andReturn on Equity(ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.

For every dollar of revenue created by RMG, 14.5 cents were generated as profits, but for SMG, every dollar of revenue gave slightly more than 15 cents in profits. This shows that SMG is more efficient at converting sales into actual profits. SMG has a higher ROE than RMG too.

Winner: SMG.

Round 2: Growth

In the second round, we will compare the compounded annual growth rate of revenue, net profit and dividend of the two firms for the past five financial years. Companies that can grow their sales and profits steadily over time should also see their share price rise.SMG has trounced RMG in both revenue and net profit growth. However, SMG does not pay a dividend, and therefore, does not have dividend growth to speak of.

Winner: SMG.

Round 3: Valuation

As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price.

We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two businesses. The values below are as of the closing prices on 4 March 2019.

SMG has a much lower PE and PS ratio compared to RMG. However, income investors may not prefer SMG as it does not pay a dividend.

Winner: SMG.

The Foolish bottom line

The final score is 3-0 to SMG, as it has triumphed over RMG in all three rounds of profitability, growth, and valuation.

However, we have yet to look at other important aspects of the companies, such as their stability of earnings, balance sheet strength, ability to generate free cash flows, management ability, and future growth prospects. Potential investors interested in the two companies should conduct deeper research before investing their money. Who knows, RMG may have better growth prospects than SMG due to its broader geographical reach. This simple exercise covers the basics and would help to take some heavy-lifting off your back though.

For more (free!) stock analyses and investing tips,sign up hereforyourFREEsubscription to The Motley Fool's investing newsletter,Take Stock Singapore.It will teach you how you can growyour wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Raffles Medical Group Ltd.

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3 Risks That Could Derail Raffles Medical Group Ltd’s Growth
- Original Post from The Motley Fool Sg

With a price-to-earnings multiple close to 30, it seems clear that the market has high hopes for Raffles Medical Group Ltd (SGX: BSL). The company just opened its first hospital in China and is set to open up another one later this year. These new endeavors could, in turn, open up more opportunities for overseas expansion.

While these are good reasons to be optimistic about Raffles Medical’s future, investors should still be aware of the potential stumbling blocks that could derail its growth. I have compiled a list of three risks facing Raffles Medical Group as it takes steps to expand overseas.

Growing pains in China

As with all new initiatives, the two new China hospitals may face an initial period of gestational losses that. Businesses expanding overseas must deal with different customer preferences, different government regulations, and country-specific operational challenges.The Chinese government, in particular, has a reputation of suddenly changing its policies, which could impact Raffles Medical business in China.

It is also common for a new hospital to experience losses at the start of its life cycle as it takes time for it to build a reputation and a network of doctors to refer patients.

Growth in home market slowing down

While the group’s international expansion truly takes flight this year, 2019 could see another year of slow growth in the company’s core market in Singapore.

Private healthcare in Singapore is becoming more competitive and saturated as more clinics and private hospitals open up in Singapore. In addition, 2018 saw the opening of another public hospital in Singapore.

All of the above factors could affect Raffles Medical Group’s business in Singapore. Over the last few years, there has already been a trend of limited revenue growth in its Singapore operation and this trend could continue onto next year.

Rising staff costs

Staff cost is the highest company expense for Raffles Medical Group. Between January to September this year, staff cost was S$185.9 million, representing 51.4% of its total revenue. There has been a steady rise in staff cost for the past few years. The table below shows staff cost as a percentage of revenue from 2015 to 2018.

Source: Author’s compilation of data from financial statements

As you can see, staff cost has risen at a faster tick than revenue over the past few years. If this persists, the company’s profit margin might narrow.

The Foolish bottom line

While the opening of the two hospitals in China represents significant growth opportunities for the company, investors of Raffles Medical Group should also be aware of its business risk. By knowing the risks involved, we will be better equipped to make an informed decision based on the company’s risk-reward profile.

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The Week in Numbers: Currency Flash Crash
- Original Post from The Motley Fool Sg

In a shocking seven-minute spell on Thursday, the Japanese yen surged through levels it had held through almost a decade. During these seven minutes, the yen spiked 8% against the Australian dollar and 10% versus the Turkish Lira. With algorithmic trading commonplace, flash crashes have become more frequent. In 2016, the pound plunged 6% in two minutes.

Earlier on Thursday, Apple Inc stunned investors when it cut its sales forecast for its latest quarter. The company forecast US$84 billion in revenue for its fiscal first quarter ended 29 December, below analysts estimate of US$91.5 billion. Apple had originally forecast revenue of between US$89 billion and US$93 billion.

Apple CEO Tim Cook blamed slowing iPhone sales in China, whose economy has been hit by the uncertainty around the US-China trade relations. The news sent Apple shares down 7.5% and triggered a broader market sell-off.

Local private healthcare provider, Raffles Medical GroupLtd (SGX: BSL)opened a 700-bed hospital in Chongqing, its first tertiary hospital in China. The hospital increases Raffles Medical’s geographical presence to 14 cities across Asia, including eight Chinese cities. The company will open another hospital in Shanghai later this year.

Meanwhile, according to flash estimates by the Ministry of Trade and Industry, Singapore’s economy grew 2.2% in the fourth quarter compared to the corresponding period last year. This was slightly slower than the 2.3% growth recorded in the previous quarter and lower than economists’ estimate of 2.5%. Overall, the economy grew by 3.3% in the whole of 2018, smaller than the 3.6% growth in 2017.

Singapore’s private home prices recorded its first quarterly decline in six quarters in the fourth quarter of 2018. Private home prices slipped 0.1% from the previous quarter. However, over the whole of last year, prices rose 7.9%, compared with a 1.1% increase in 2017. HDB resale flats did not fare well, as prices fell 0.9% last year, including a 0.2% decline in the fourth quarter.

Lastly, new tax laws in China are expected to have a significant impact on the mega-rich in China, where personal wealth stands at US$24 trillion. Chinese overseas wealth has more than doubled in just six years to US$1 trillion in 2018.

Under the new rules, owners of offshore companies will have to pay taxes on dividends and face levies of as much as 20% on profits. In the past, the rich could avoid paying taxes on overseas earnings by acquiring a foreign passport, while keeping Chinese citizenship. However, starting this month, this practice won’t work as the government seeks to close out the loopholes.

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Raffles Medical Group Ltd Opens Its Chongqing Hospital
- Original Post from The Motley Fool Sg

Raffles Medical Group Ltd (SGX: BSL) announced the opening of the much awaitedRaffles Hospital Chongqing before the stock market opened today. The hospital, which will be owned and operated by Raffles Medical, is Singapore’s first international tertiary hospital in China.


Raffles Hospital Chongqing is a 700-bed hospital with two tower blocks connected by a three-storey podium, spanning over 100,000 square metres in gross floor area. The hospital will boast a hospital-hotel management style with suites, single, and two-bedded wards.

When the hospital is fully opened, it will offer specialist services and centres of excellence in gastrointestinal surgery, obstetrics and gynaecology, paediatrics, cardiovascular surgery, neuroscience, and oncology.

Raffles Hospital Chongqing’s medical panel and management comprise a mix of local and international professionals from the healthcare industry. Some of the locally-hired senior staff and doctors were sent to Singapore for attachment to familiarise themselves with Raffles Hospital’s system and service model.

Dr Loo Choon Yong, executive chairman of Raffles Medical, commented:

“This is an exciting time for us at Raffles as we have been looking at the healthcare space in China for some time. We are committed to bring the Raffles’ brand of quality, peer-reviewed healthcare to China through Raffles Hospital Chongqing and, in time to come, Raffles Hospital Shanghai.”

So what?

The total addressable market for the new hospital is huge. Chongqing sports a population size of 34 million. To put things into perspective, the city’s population is six times bigger than that of Singapore, which has a population of 5.6 million.

On top of serving the growing middle and upper-income population in Chongqing, the hospital will also meet the healthcare needs of the increasing number of foreigners working and setting up their bases in Chongqing.

Raffles Hospital Chongqing is located at Chongqing’s Liangjiang New Area and is in the same district as the Chongqing International Airport. The hospital’s strategic location would enable it to ride on China’s Belt and Road Initiative.

High-speed trains connect Chongqing to Shanghai enabling synergies between Raffles Hospital Chongqing and Raffles Hospital Shanghai, which is expected to open in the second half of 2019.

Now what?

The new hospital in Chongqing might not move the needle for Raffles Medical immediately. In fact, it could take a few years for the hospital to ramp up its operations and contribute meaningfully to the group’s bottom-line.

But the expansion in China could be the spark that Raffles Medical needs to return to growth over the longer term. Since 2009, its bottom-line has grown by 8.1% per annum with its operations mostly in Singapore. With its two China hospitals, its earnings could grow at a faster rate.

Currently, Raffles Medical has a trailing price-to-earnings ratio of 28 at its current share price of S$1.10, which might look expensive. However, given the company’s track record of generating healthy cash flow and its prospects, paying up for growth might just be what the doctor ordered.

$Raffles Medical(BSL.SI)

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Why I Am Not Selling Raffles Medical Group Ltd Shares
- Original Post from The Motley Fool Sg

Raffles Medical Group Ltd(SGX: BSL) was once a stock market darling.

From 2005 to 2015, the company was in its high-growth phase, expanding its network of clinics and hospital services. Raffles Medical Group’s revenue and profitgrew alongside its expansion and expectations were high.

However, in the past couple of years, the company’s growth has come to a halt, hurting the share price as a result.

The big slowdown

Stagnant revenue has led to suggestions that its core Singapore market has reached saturation. To compound the situation, the company also acquired a network of clinics overseas that has been loss-making, squeezing the company’s margins and profits.

Not surprisingly, investors have “punished” Raffles Medical’s stock for its lack of growth. From its 2015 peak, its share price has since fallen around 30%.

However, I still expect Raffles Medial’s performance to improve over the long-term. I am confident that under the leadership of founder and chief executive officer, Dr Loo Choon Yong, Raffles Medical can turn a corner and return to growth in the future.

In fact, if the stock were to decline further, I would consider adding more shares of the company.

Massive market opportunity in China

There’s a limit to how big Singapore’s private healthcare market will be.

In response, Raffles Medical had taken the initiative to expand its operations overseas. Currently, the company owns clinics in China, Vietnam, and Japan. And that is just the tip of the iceberg. The group is in the process of constructing and opening two new hospitals: one in Chongqing and one in Shanghai.

China has one of the fastest growing middle-class populations in the world. As such, demand for private health-care has been rising fast. According to DrLoo’s estimates, there are around 140 million people in China who can afford Raffles Medical’s standard of care.

Dr Loo has also assured investors and potential clients that standards in the Chinese hospital will be nothing short of the level seen in Singapore. Local and international doctors were recruited and will undergo training in Singapore.

Besides the two hospitals in development, Dr Loo has pointed out that Beijing and Shenzhen are keen on having similar hospitals.

While the growth looks promising, international expansion might not always go smoothly. Raffles Medical needs to cater to cultural differences and overcome political challenges. However,I am confident that the hospitals in China will do well despite the risks. Raffles Medical has a track record of success and a trusted brand under the leadership of Dr Loo.

Healthy cash flows and stable core business

Raffles Medical’s core business has been resilient over the years. The group’s annual operating cash flow has been consistently above S$70 million in each of the last five years, suggesting that its core Singapore business is stable.

Despite limited growth opportunities, Singapore will continue to provide the company with healthy earnings and cash flow to expand its business and pay dividends to shareholders.The group also has investments in property, which provides rental income.

The core Singapore operations will play an important supporting role in the initial start-up phase of its two new hospitals in China.

The Foolish bottom line

Despite the limited revenue growth in recent years, I believe that Raffles Medical can return to growth when its two new hospitals commence operations. Profitability from its Chinese hospital might take a few years, but if the group’s track record is anything to go by, I expect profits to flow in eventually.

China provides a massive market opportunity. If the first two hospitals in China prove tobe successful, there could be more hospitals in the longer run.

Raffles Medical’s shares currently have a price-to-earnings multiple of 28. Its valuation is certainly not cheap in comparison with the broader stock market. However, with its long-term track record, huge market opportunity for growth, and operations in a defensive industry, I am willing to pay up for its stock.

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