SGX Market Updates

Singapore Listed Healthcare Companies Going For Growth


PUBLISHED ON |

14 May 2018

  • Frost & Sullivan expects APAC’s Healthcare Industry to grow 11% in 2018, forming 28% of the US$2 trillion Global Healthcare market; Growth is expected to come from increased technology adoption, innovative healthcare access & delivery of care outside traditional hospital settings.

  • The five largest Healthcare companies listed on SGX, IHH, Top Glove, RMG, TalkMed & HMI are all pursuing growth strategies to expand their businesses. Across the five stocks are examples of recent acquisitions, construction & refurbishment, hiring drives and collaborations.

  • Singapore’s segment of Healthcare & Equipment Stocks also maintain financials and valuations in line with APAC. On average, these stocks maintain a five year median ROE of 9% in addition to a five year median P/E ratio of 23x, both aligned with APAC medians.




In January 2018, Frost & Sullivan estimated that the Asia-Pacific healthcare industry is expected to grow at 11.1% in 2018. This is purported to represent one of the fastest growing regions in the world, as the global healthcare economy averages a 4.8% annual growth rate. As detailed by Frost & Sullivan (click here) the positive growth is fuelled by increasing adoption of technology, innovative healthcare access programs and delivery of care outside traditional hospital settings.

Singapore’s five largest capitalised companies of the GICS® Health Care Equipment & Services Industry are in growth phrases which span organic and inorganic initiatives. The majority expansions of healthcare services and equipment production have seen these stocks further expand their international presence. Across the five stocks are examples of recent acquisitions, construction and refurbishments in addition to hiring drives to support construction drives. Industry collaborations have also featured as method to growing services.

Meanwhile competition through lower-cost treatments and new start-ups, in addition to rising labour and capital costs are challenges for the Healthcare Sector companies. For those healthcare service and equipment business that are expanding across the not just the region but the globe, exchange rate volatility presents a potential challenge.



Recent Turnover Growth

The largest capitalised stock of the segment, IHH Healthcare Bhd (“IHH”) has seen monthly turnover on SGX grow over the past six months, whilst Top Glove Corporation Bhd (“Top Glove”) volume was marginally higher. For the six months spanning November 2017 to April 2018, average daily turnover on IHH was S$281,200 which was up 85% from the preceding six months. Top Glove’s turnover was up just 1% over the same period to S$63,200.



Singapore’s Largest Health Care Equipment & Services Stocks

The table below details 15 Health Care Equipment and Services companies that maintain a market capitalisation above S$100 million. Note the table does not include Religare Healthcare Trust whose sponsor is the aforementioned Fortis Healthcare, or the two REITs - First REIT and ParkwayLife REIT. The 15 stocks have averaged a 9.2% gain in the 2018 year thus far. For a full list of the Health Care Equipment and Services stocks click here.

Click on the company names below to view their full profile on StockFacts.


Name SGX
Code
Market
Cap
S$M
11 May
Closing
Price 
Total
Return
YTD %
Total
Return
12M %
P/E
(x)
Dvd
Ind Yld
%
IHH Healthcare Q0F 16,726 2.030 4.6 2.3 53.3 0.5
Top Glove BVA 4,151 3.250 21.5 101.1 32.7 0.9
Raffles Medical Group BSL 1,984 1.120 0.0 -19.1 27.8 2.0
TalkMED Group 5G3 881 0.670 0.5 -17.2 30.5 3.2
Health Management Intl 588 561 0.670 2.1 11.9 30.0 0.5
Q & M Dental Group S QC7 481 0.605 -0.1 -11.9 20.2 1.9
OUE Lippo Healthcare 5WA 282 0.127 1.6 18.7 N/A N/A
Clearbridge Health 1H3 230 0.470 32.4 67.9 N/A N/A
Singapore Medical Group 5OT 225 0.490 -14.8 -13.3 24.3 N/A
Healthway Medical Corp 5NG 217 0.048 -11.1 14.3 N/A N/A
Cordlife Group P8A 179 0.710 -10.1 -29.3 N/A 0.7
Techcomp Holdings T43 175 0.635 126.8 154.0 N/A N/A
Singapore O&G 1D8 172 0.360 -16.2 -48.8 20.2 4.2
ISEC Healthcare 40T 163 0.315 2.4 6.0 N/A 3.8
HC Surgical Specialists 1B1 101 0.680 -1.4 21.4 N/A 5.3
Average 9.2 17.2 29.9 2.3
Median  0.5 6.0 28.9 2.0

Source: Bloomberg & SGX StockFacts (data as of 11 May 2018)



Singapore’s segment of Healthcare & Equipment Stocks maintain similar financials and valuations in line with the region. Singapore’s five year median ROE and five year median P/E ratio at 9% and 23x are both aligned with Asia-Pacific medians. The overall global five year median ROE for Healthcare & Equipment Stocks is lower at 6%, with the five year median P/E ratio marginally higher at 25x.



Growth Initiatives

As noted above across the five stocks are examples of recent acquisitions, construction and refurbishments in addition to hiring drives to support construction drives. For instance:

  • IHH is reportedly seeking approval by Fortis Healthcare shareholders for the acquisition of the specialist hospitals in India, after it was unable to acquire board approval (click here for more) while the proposal can be read here. Gleneagles Hong Kong opened in March 2017 and is now in full operation to provide innovative, transparent and high-quality healthcare services. According to IHH’s latest financials it has been receiving positive reviews from both patients and doctors, registering steady month-on-month growth in service demands.
  • Top Glove recently completed its acquisition surgical glove producer Aspion Sdn Bhd. Top Glove has the objective of increasing its market share in global surgical gloves to 30% by 2020. Top Glove exports to approximately 200 countries worldwide. As noted in its FY17 Annual Report (click here) Top Glove will continue to explore synergistic M&A and joint venture opportunities, which will enable the Group to grow more efficiently, while diversification into other revenue sources will serve to prevent over-dependence on any one business.
  • Raffles Medical Group opened its Raffles Specialist Centre with the extension to Raffles Hospital in January. On the international front is scheduled to open a 700 bed hospital in Chongqing in late 2018 and a 400 bed hospital in Shanghai in the second half of 2019. As noted in its recent Financial statement (click here) construction of Raffles Hospital Chongqing and procurement of equipment are progressing according to plans. Recruitment of International and Chinese physicians as well as hospital management staff have begun and the response has been positive.
  • TalkMed Group listed in 2013 and now has a number of wholly or partially owned subsidiaries spanning Singapore, Vietnam, China and Hong Kong. In September 2017, TalkMed Group incorporated a wholly-owned subsidiary, TalkMed China to explore healthcare related collaborations in China. As noted in its FY17 Annual Report (click here) subsequent to the incorporation of TalkMed China, TalkMed China incorporated a 75%-owned subsidiary, TalkMed Chongqing Pte. Ltd. with the aim of providing healthcare management services in Chongqing, China. In November 2017, TalkMed China entered into a collaboration with Beijing New Hope Hospital Management Co. Ltd. for TalkMed China to offer management services for the Singapore Cancer Centre branded oncology services in China.
  • Health Management International (“HMI”) has also embarked on expansion initiatives to capture growth opportunities. At Mahkota, a new ward has been opened which allows management the opportunity to refurbish its older wards over time. With its recent results (click here) management noted that in addition, the hospital will be constructing a small extension to the building to allow more clinical space for its radiology and other departments. Meanwhile at Regency, the Group noted the new planned hospital extension block at Regency is in the regulatory approval process. Pending the relevant approvals, this new block will more than double existing capacity with additional inpatient beds, clinical services, operating theatres and clinical suites for sale or rental to doctors.






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