4 Stocks This Week (Healthcare) [9 Mar 2018] – Top Glove; IHH, Haw Par, Raffles Medical
This week saw the conclusion of the Committee of Supply Budget debates for 2018. The national budget this year has been particularly closely watched by citizens as well as investors.
A key issue that shaped budget considerations was the projected increase in healthcare costs in the years to come. Some of the plans mooted to deal with this include changes to full-riders for integrated shield plans, raising taxes in anticipation of expanded expenditure as well as tweaks to a range of other policies.
If you’re a Singaporean, you might feel a little apprehensive at the economic and societal challenges to come. But as a Singaporean investor, you could take a larger, macro-view of things and consider investing in the sectors that will likely see growth in the coming years. As the saying goes, if there are lemons to be had, then why not make lemonade?
Investors can get exposure to the healthcare theme through SGX-listed healthcare and medical technology stocks, many of which have regional and global operations with plans to rapidly expand to meet growing demand.
For this week’s episode of 4 Stocks This Week, we will examine the four largest healthcare companies listed on SGX.
Top Glove Corporation Bhd. (SGX: BVA)
Based in Malaysia, Top Glove Corporation Bhd. is in the business of manufacturing and distribution of rubber gloves and other rubber-related goods to 195 countries around the world. It also produces and sells concentrate latex and other chemicals. The company also provides management, and clinical and medical services.
Top Glove is listed on both the Bursa Malaysia Stock Exchange Main Board and SGX Mainboard.
For the three months ended 30 November 2017, Top Glove reported its highest-ever quarterly sales revenue of RM 938.1 million, which represents an increase of 19.4% year-on-year. The company attributed the strong performance to robust demand growth in developed and emerging markets. It also noted that disruption in vinyl glove supply after China’s enforcement actions against polluting industries further bolstered sales of natural rubber and nitrile gloves.
At a Special/Extraordinary Shareholders Meeting held on March 8, Top Glove’s shareholders approved its acquisition of Aspion Sdn Bhd for RM 1.37 billion in cash and shares. This would make Top Glove the world’s largest manufacturer of surgical gloves, in addition to being the world’s largest manufacturer of rubber gloves.
Top Glove said that it plans to continue to expand its operations by constructing one to two factories each year, explore mergers and acquisitions, as well as venture into synergistic industries.
The company’s market cap is currently $4.032 billion. Their stock closed at $3.21 this week, representing about a 19% year-to-date price increase.
IHH Healthcare Berhad (SGX: Q0F)
IHH Healthcare Berhad is the second largest healthcare group in the world by market capitalisation, with operations in Asia, Central and Eastern Europe, the Middle East, and North Africa.
The company provides primary, secondary and tertiary care services through its portfolio of 49 healthcare-related properties, some of which are recognised premium brands in Singapore like “Mount Elizabeth”, “Gleneagles” and “Shenton Parkway”. It operates about 10,000 licensed beds in 50 hospitals, medical centres, and clinics.
Major shareholders of the group include Malaysia quasi-government entities such as Malaysia’s strategic investment fund Khazanah Nasional Berhad (40.98%), Employees Provident Fund of Malaysia (8.57%) and the government-linked investment house Permodalan Nasional Berhad (3.89%).
In a 28 February 2018 filing, the group announced that is looking to spend RM 3 billion in capital expenditure from 2018 to 2020 to make acquisitions in China, Turkey and Malaysia.
IHH Healthcare is listed on Bursa Malaysia and the Mainboard of SGX. It has a market cap on SGX of $16.726 billion and closed this week at $2.03.
Haw Par Corporation Limited (SGX: H02)
Haw Par Corporation and its subsidiaries are primarily in the business of manufacturing and selling pharmaceutical and healthcare products.
Even if they have not heard of the holding company Haw Par, people around the world would probably have used their marquee product: Tiger Balm, which is a leading topical analgesic available in 100 countries. The Tiger Balm product line extends to ointments, plasters, muscle rubs and mosquito repellent sprays, and forms the core of Haw Par Corporation’s healthcare division.
Haw Par Corporation also has interests in the family-friendly entertainment and attraction business such as Underwater World Pattaya in Thailand, which opened in 2003.
The company’s property division owns and leases out investment properties in Asia, including Haw Par Centre, Haw Par Glass Tower and Haw Par Technocentre in Singapore, as well as Menara Haw Par, a freehold commercial building in Kuala Lumpur, which together make up 45,399 square metres of commercial and industrial space.
For the full year ended 31 December 2017, Haw Par reported that revenues of S$222.8 million, which is a 10.5% gain. This was largely driven by the performance of its healthcare and property businesses. Its healthcare division reported higher sales and profits in most key markets.
On 26 February 2018, Haw Par Corporation Limited announced the second and final proposed dividend of 10 cents per ordinary share tax-exempt for the year 2017, payable on 17 May 2018.
Haw Par Corporation’s stock closed at $12.12 this week, which marks a 5.9% increase in price year-to-date.
Raffles Medical Group (SGX: BSL)
Raffles Medical Group is a leading healthcare provider that operates clinics and hospitals primarily in Singapore. In addition to running the flagship Raffles Hospital, the group runs 100 medical clinics that provide services like general practice/family medicine,health screening, immunisation, corporate programmes.
On 26 February 2018, the company reported audited consolidated earnings results for the year ended December 31, 2017. Reported revenues were at $477,583,000, compared to $473,608,000 a year ago.
The group stated that it is looking to expand into overseas market due to Singapore’s small market size and the increasing local competition. Strong operating cash flows enabled the group to support its investments in Raffles Hospital Extension and Raffles Hospital Shanghai and Chongqing. Barring unforeseen circumstances, the directors started that they expect the group to remain profitable in 2018.
With a current market cap of $2.054 billion, the group’s stock closed this week at $1.16.
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