4 Stocks This Week (Healthcare) [18 May 2018] – HMI; Raffles Medical; TalkMed; Top Glove
Healthcare remains on the top of mind this week, as Parliament debated the President’s address. Some of the ideas discussed during the debates include exempting primary healthcare services from GST, and making Medisave usage more flexible.
Outside of Parliament, there were calls to do more to attract fresh tech talent into healthcare. The Ministry of Health projects that 30,000 additional healthcare workers will be needed by 2020.
While facing growing challenges to meet rising expectations of patients alongside pressure to keep solutions affordable, the promise of new technology and growing demand means the future of the healthcare sector remains bright.
To meet this rising demand, the largest Healthcare Companies listed in Singapore are gearing up for expansion and funnelling additional investment into mergers and acquisitions (M&A), construction and attracting talent in the healthcare professionals. Some are looking to broaden their product and service offerings in partnership with different industries.
In January, Frost & Sullivan projected that the Healthcare industry in the Asia-Pacific region would grow by 11% this year. Situated in one of the highest growth regions in the world, Singapore-listed healthcare providers are expected to benefit from this positive momentum.
For this week’s edition of 4 Stocks This Week, we will analyse four of the largest healthcare companies listed on the SGX.
Health Management International Ltd (SGX: 588)
Health Management International (HMI) has operations in Singapore, Malaysia and Indonesia. HMI owns two tertiary care hospitals in Malaysia, supported by a regional patient referral network and it also runs a healthcare training institute in Singapore.
In November 2017, Temasek-Owned Heliconia Capital Management bought a 2% stake for $11 million.
This week, HMI committed $40 million for a 62.5 per cent equity stake in StarMed @ Farrer Square (StarMed@FS), Singapore’s first private one-stop ambulatory care centre. The acquisition comprises of the $6.9 million purchase price, a shareholder’s loan of $1.9m and the assumption of obligations of $31.2m worth of loans.
In Malaysia, HMI is expanding its existing facilities in Makhota and Regency to meet the rising demand for private healthcare from local and foreign patients. This comes with projected strong growth in medical tourism with active support from the Malaysian Government through special incentives and tax allowances.
HMI’s share price has grown 2.1% year-to-date (YTD) and is up 11.9% from 12 months ago. With a current market cap of $548.8 million, HMI closed at $0.65 per share this week.
Raffles Medical Group Ltd (SGX: BSL)
Raffles Medical Group (RMG) is a globally-integrated private healthcare provider which provides a diversified range of health services. While its businesses are primarily centred around Singapore, it owns numerous medical facilities in thirteen cities across Asia.
Net profit rose 1.7% to $15.8 million for the first quarter, while revenue grew 4.6% to $120.2 million. This came on the back of more local patients and a newly inked contract to provide air border screening services.
RMG is slated to open a hospital in Chongqing in late 2018 and another hospital in Shanghai in the second half of 2019. It also announced that Raffles Hospital is undergoing refurbishment to further increase both inpatient capacity and outpatient primary care centres to meet the growing healthcare demands of local and foreign patients.
RMG’s share price has stayed flat YTD and declined 19.1% from 12 months ago. With a current market cap of $1,931.3 million, Raffles Medical ended the week at $1.08 per share.
TalkMed Group Limited (SGX: 5G3)
TalkMed Group provides private healthcare services centred around medical oncology and palliative care through Parkway Cancer Centre in Singapore, but also has numerous wholly-owned and partially-owned subsidiaries in Vietnam, China and Hong Kong.
TalkMed suffered a 37.2% fall of Q1 earnings to $5.1m. Revenue fell 25.7% to $12.1m from a year ago, due to falling patient numbers which followed TalkMed CEO Dr Ang Peng Tiam’s suspension.
After having been suspended for eight months, Dr Ang resumed his medical duties on March 25. This is likely to be good news as Dr Ang previously raked in between 40% to 50% TalkMed’s revenue. The company expects revenue and earnings to increase with his return.
TalkMed has achieved a 3.5% return YTD and a 3.2% Dividend Indicated Yield, but it is still down 17.2% from 12 months ago. With a current market cap of $893.7 million, TalkMed Group closed at $0.68 per share this week.
Top Glove Corporation Bhd. (SGX: BVA)
Top Glove, listed in both Singapore and Malaysia, reinforced its position as the world’s largest rubber glove manufacturer. It recently finished its acquisition of fellow surgical glove producer Aspion Sdn Bhd, and as of May 2018, has increased its production capacity to 57.5 billion gloves annually.
Executive Chairman Tan Sri Lim Wee Chai said in April that Top Glove would continue to seek out M&A opportunities to expand its market share effectively and efficiently. Post-acquisition, Top Glove aims to continue growing its market share in global surgical gloves to 30% by 2020.
To fuel its expansion plans, Top Glove announced in April that it would issue up to US$300mil worth of convertible bonds, to raise funds for loan repayments. Top Glove also said it would need to embrace M&As and organic growth to secure its long-term position.
Beyond its core markets, Top Glove is also venturing into medical-related products. Through its subsidiary Top Feel, who announced on March 29 it was acquiring an 85% stake in Duramedical with RM2.85 million in cash ($0.97 million).
Top Glove has continued to outperform most healthcare stocks, having achieved 21.5% return YTD and up 101.1% over the last 12 months. It remains to be seen how the change in Malaysia’s government will affect Top Glove’s performance over the coming months.
With a current market cap of $4.34 billion, Top Glove’s closing price for this week was at $3.50.
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