How Profitable Are The Different Businesses Of Health Management International Ltd?
Health Management International Ltd (SGX: 588), or HMI, is a healthcare services provider with a presence in Singapore, Malaysia, and Indonesia.
Over the past five years, Health Management International’s stock price has climbed by around 500% or so. This strong stock market performance led me to take a closer look at the company’s business.
Recently, I studied the different ways that Health Management International generates revenue. I thought it would be interesting and useful to follow up by looking at how profitable each business segment within the company is.
More specifically, I want to understand how well each segment is doing when it comes to making a profit on each dollar of Health Management International’s equity that they employ. In other words, I want to calculate the return on equity for each segment. (The return on equity is found by dividing each segment’s profit by its net assets, or equity.)
The table below shows the pre-tax profit, equity, and return on equity for the company’s Mahkota Medical Centre and Regency Specialist Hospital segments. The third segment – HMI Institute of Health Sciences – is not included since it was merely 2.4% of Health Management International’s total revenue in its fiscal year ended 30 June 2016 (FY2016).
Source: Health Management International FY2016 annual report
From the table above, we can see that Regency Specialist Hospital is the more profitable of the two segments, given its higher ROE.
In FY2016, Regency Specialist Hospital was the fastest growing segment within the company. If its growth keeps up, investors can expect Health Management International’s overall return on equity to increase. This, of course, assumes that the Regency Specialist Hospital segment can maintain its ROE as it grows, and that the other segment does not suffer a decline in its ROE.
In all, Health Management International appears to be a rather straight forward company to understand given that investors need to focus on just the two hospitals mentioned above.