• Singapore’s largest capitalised stocks of the Healthcare Providers and Services Industry have announced and affirmed several expansion plans in 2017. The majority of these stocks are expanding services in Greater China, South East Asia or at home in Singapore.

• IHH Healthcare Bhd, Raffles Medical, Health Management Intl, TalkMed and Q&M Dental are the five largest capitalised companies of the Healthcare Providers & Services Industry, and are pursuing regional expansion plans.

• The 17 SGX-listed stocks of the Healthcare Providers & Services Industry and two REITs investing in properties providing healthcare services averaged a 2.4% gain in the YTD, following a median gain of 8.9% in 2017.

Demand for healthcare services continues to increase across the world with more people and people living longer. Longevity and population growth has particularly been on the rise in Asia, which has directionally correlated with secular expenditure on healthcare services.

As discussed here the IMF maintain that East Asia’s (includes China, Hong Kong, Japan, North and South Korea, Mongolia, Macao and Taiwan) population is ageing faster than anywhere else in the world, with its old-age dependency ratio roughly tripling by 2050.

Expanding Existing Healthcare Services

The majority of the 17 stocks that make up the GICS^® Healthcare Providers & Services Industry announced or affirmed expansion plans during 2017. For instance the five largest capitalised stocks of the Healthcare Providers & Services Industry not including the Business Trust or REITs have announced the following expansions:

• IHH Healthcare Berhad (“IHH”) opened new hospitals in Hong Kong and Istanbul in March 2017. When reporting its most recent financials, IHH noted it was making further headway in the important market of Greater China as its next home market, in addition to maintaining a strong pipeline of expansion projects in its existing home markets.
• Raffles Medical Group (“RMG”) estimates that the Raffles Hospital Extension will contribute an additional 220,000 square feet of space, thereby almost doubling the space available for clinical services in the integrated medical complex. In August 2017, RMG opened two new in-house clinics in Dover and Tampines, then re-opened its Northpoint City clinic in September 2017 after the mall’s retrofitting. RMG has also been opening new clinics at Changi Airport, where it has been the at the designated medical group since 1990. As noted with the 3QFY17 results, RMG’s construction of the 700-bed RafflesHospital Chongqing and 400-bed RafflesHospital Shanghai were progressing according to plan. These hospitals are targeted to be operational by second half 2018 and second half 2019 respectively.
• Health Management International (“HMI”) highlighted in its 1QFY18 results, that it was increasing bed capacities at its key facilities. HMI is currently increasing bed capacity from 266 beds to 300 beds in FY18 with eventual capacity of 340 beds at the Mahkota Medical Centre. At the Regency Specialist Hospital, HMI is increasing bed capacity from 166 beds to 200 beds in FY18; and planning to build an extension block in order to become a 380-bed tertiary hospital with capacity to expand to an eventual 500-bed hospital.
• TalkMed highlighted an intention to use its Stem Med holdings to explore business opportunities in Indonesia in the areas of operation of cellular laboratories and storage facilities and cellular therapeutics clinics. As noted in its 3QFY17 results, by virtue of its 60% interest in Stem Med, TalkMed holds a 54% stake of Stem Med Indonesia Pte. Ltd which was incorporated in March 2017. The principal activities of Catalist–listed TalkMed are the provision of medical oncology services and stem cell transplants services.
• Q&M Dental has added two dental outlets in Singapore and five dental outlets in Malaysia over the 12 months period through to 30 September 2017. In Singapore the Group has initiated a strategy of intensive organic growth of its dental clinics in Singapore. It will expand its team of dentists to support the future growth of its operation in Singapore. The Group is also closely monitoring the Malaysian economy with a view of further expansion into Malaysia and seeking opportunities for the acquisition of larger and established dental institutions and dental supplies manufacturers in PRC.

Beyond the five largest capitalised companies, there are more instances of Healthcare providers expanding regional services. Two weeks ago Cordlife Group signed a sale and purchase agreement (click here) to acquire full control of HealthBaby Biotech (Hong Kong) Co., Limited in a move that will expand its presence in the private cord blood banking industry in Hong Kong and Macau. ISEC Healthcare have noted it is expanding into the Asia Pacific region acquire assets, businesses and companies and has identified China, Indonesia, Myanmar and Vietnam as markets with growth potential.

Expanding in Singapore, Healthway Medical Corp announced with its 3QFY17 the Group setup a new Gastroenterology clinic in November 2017 - as part of its endeavour to expand its clinic network and provide better patient care. Singapore Medical Group (“SMG”) have noted that it has have brought two O&G specialists on board and will continue to hire additional specialists in the near-term. Additionally, to meet the intense demand for its diagnostic imaging services, SMG has commenced the construction of a new diagnostics centre at Novena Medical Centre.

Also expanding in Singapore, In July 2017, Singapore O&G extended its services through the offering of maiden general paediatrics and adolescent medicine services. With the new Paediatrics segment, it allows the Group to continue to take care of its existing patients and their newborns. HC Surgical Specialists announced on 2 January (click here) it had entered into a sale and purchase agreement to acquire 51.0% of the total issued and paid-up share capital of HMC Medical Pte. Ltd. for a total purchase consideration of S$673,000. HMC Medical Pte. Ltd. currently operates a clinic at Upper Thomson Road, where the Group has no presence, thereby increasing the Group’s reach and market share.

Recent Performances of the Industry

SGX lists 17 stocks that make up the GICS^® Healthcare Providers & Services Industry and the two Real Estate Investment Trusts (REITs) investing in properties providing healthcare services. These two REITs are ParkwayLife REIT and First REIT. Together the 19 securities averaged a 2.4% gain in the year thus far following on from a median gain of 8.9% in 2017.

Total Returns of GICS^® Healthcare Providers & Services Industry, ParkwayLife REIT & First REIT

Source: StockFacts, Bloomberg (Data as of 16 January 2018)

Note the Median measure is used for comparative measures in this instance due to the impact of a 150% gain by OUE Lippo Healthcare (“OUELH”) on the average performance which stood at 17.3%. Catalist-listed OUELH is principally involved in development and management of healthcare and related facilities in Japan and China. The company seeking to expand its healthcare portfolio across China, Japan and Southeast Asia and on 10 January announced (click here) a proposed placement of 562.5 million new ordinary shares to ITOCHU Corporation.

Comparative Performances & Latest Financials

As discussed above expansions of services were achieved organically and in multiple instances, non-organically through acquisitions, joint ventures or collaborations. The performances of the 17 SGX-listed stocks that represent the GICS^® Health Care Providers and Services Industry and relevant two REITs are tabled below. To see more details on each stock below in SGX StockFacts click on the stock name.

Source: StockFacts, Bloomberg (Data as of 16 January 2018).
Note performances are not provided in the above table if the company debuted during the relevant timeframe.

The most recent addition to the segment was Clearbridge Health which listed on Catalist raising S$24.6 million and opening with market capitalisation of S$134.7 million on 18 December 2017. The stock ended yesterday at 42.5 cents, 51.8% higher than the IPO price of 28 cents. Clearbridge Health specialises in the delivery of precision medicine in Asia in addition to providing laboratory and Health Care services. Its precision medical technology businesses include Clearbridge BioPhotonics which develops the next generation microscope technology; and Clearbridge BioMedics, which developed the ClearCell® FX System - one of the world’s first fully automated cell retrieval systems.

Of the stocks tabled above, 13 currently maintain Price-to-Earnings (P/E) ratios, with an average P/E of 31x and median P/E of 25x. The five year average P/E for 10 of the stocks is 29x with a median P/E of 23x. P/E ratios and history for the respective stocks can be found in SGX StockFacts (click here).