SGX Market Updates

SGX 5 Best-Performing Healthcare Stocks Average 30% YTD Return


PUBLISHED ON |

14 October 2019

  • With Singapore’s average annual healthcare spending expected to rise to almost 3% of GDP over the next decade from 2.2% currently, the government has been steadily adding facilities to meet growing demand as the population ages. Drivers of increased healthcare spending in Singapore and the rest of Asia include accelerated ageing, the rise of lifestyle diseases, as well as growing disposable incomes.

  • The iEdge SG All Healthcare Index, which tracks Singapore's listed healthcare sector, comprises 34 constituents with a combined market cap of over S$34 billion. Healthcare services providers are well-represented, accounting for more than half the Index’s constituents.

  • In the YTD, 5 best-performing constituents of the iEdge SG All Healthcare Index with market cap above S$100 million were: ISEC (+48.6% ), HMI (+35.1%), Parkway Life REIT (+25.1%), Haw Par (+20.8%) and iX Biopharma (+18.0%). These 5 averaged a total return of 29.5% over the period.




Robust Long-Term Prospects

Singapore’s healthcare sector is typically viewed as a defensive segment, poised to enjoy multi-year growth prospects. Drivers of Asia’s increased healthcare spending levels include accelerated ageing rates, the rise of lifestyle diseases like diabetes and hypertension, as well as growing disposable incomes. 

Frost & Sullivan has estimated that the Asia- Pacific healthcare industry expanded at 11.1% in 2018, accounting for 28% of the US$2 trillion global market. This represents one of the fastest growing regions in the world, with the global healthcare economy averaging only a 4.8% annual growth rate last year. The positive expansion is fuelled by increasing adoption of technology, innovative healthcare access programs and delivery of care outside traditional hospital settings.



Growing Domestic Spending and Demand

When unveiling Singapore’s 2019 Budget in February, Finance Minister Heng Swee Keat said healthcare spending is expected to grow to S$11.7 billion in FY19 from S$10.6 billion the previous year, as the government raises patient subsidies while expanding clinical services and capacity. The government has also estimated that Singapore’s average annual healthcare spending will rise to almost 3% of GDP over the next decade from 2.2% of GDP currently, reflecting an increase of nearly 0.8-percentage point of GDP.

Since 2010, the government has been steadily adding facilities to meet growing healthcare demand as the population ages. Singapore’s biggest new hospital Sengkang General Hospital, and Sengkang Community Hospital, which provides rehabilitation services, opened progressively from August last year. They constitute a part of the integrated Sengkang healthcare campus in north-eastern Singapore that will offer 1,000 acute hospital beds and 400 community beds when it opens fully.  Also opening progressively from 2022, the “future-ready” hospital facility in northern Singapore – the Woodlands Health Campus – will feature 1,800 beds over 7.66 hectares, specialist outpatient clinics, and long-term care housing amidst lush greenery and open spaces. 



Singapore’s Listed Healthcare Sector

The listed healthcare sector in Singapore, as tracked by the benchmark iEdge SG All Healthcare Index, comprises companies that operate in the segments of pharmaceuticals and biotechnology, clinic and patient services, as well as medical equipment and supplies.

The iEdge SG All Healthcare Index has 34 constituents with a combined market capitalisation of over S$34 billion. Healthcare services providers are well-represented, accounting for more than half the Index’s constituents. The 5 constituents with the largest weightings in the Index are: Parkway Life REIT (11.5%), Haw Par Corp (10.4%), IHH Healthcare (10.2%), First REIT (9.8%), Top Glove Corp (9.6%).



Recent Corporate Actions of Listed Healthcare Providers

Some analysts have pointed to recent corporate developments among Singapore’s listed healthcare providers as having stoked investor interest in the sector. Asian Healthcare Specialists (AHS) announced in July it had entered into a term sheet to acquire 51% of Cornerstone Asia Health via payment of S$5 million in cash and the issue of AHS shares at S$0.26 per share. Cornerstone Asia Health offers key services in ophthalmology, urology, dermatology and gastroenterology, as well as family medicine. It has five specialists and medical doctors operating eight specialist and family medicine clinics.

In August, a unit of China’s Aier Eye Hospital Group agreed to buy a 35% stake in ISEC Healthcare for S$67.1 million. The conditional sale and purchase agreement, which involves the purchase of 186.3 million ISEC shares at S$0.36, will trigger a mandatory general offer for the remaining ISEC shares at the same price when completed.

This Friday, Health Management International (HMI) shareholders will vote on its management's joint bid with private equity investor EQT Mid Market Asia III GP BV (EQT GP) to privatise the healthcare provider. The potential deal – unveiled in July – will be executed through a scheme of arrangement that values HMI at about S$611 million. Under the scheme, each HMI shareholder will receive either S$0.73 in cash or one new ordinary share at the same price in the offeror.



Best-Performing Index Constituents in YTD

Not surprisingly, ISEC Healthcare and Health Management International (HMI) were the best-performing and second best-performing constituents of the iEdge SG All Healthcare Index with market capitalisation above S$100 million in the 2019 year-to-date. They generated total returns of +48.6% and +35.1% respectively over the period.

The other three best-performing constituents with market cap above S$100 million were Parkway Life REIT (+25.1%), Haw Par Corp (+20.8%) and iX Biopharma (+18.0%). These 5 constituents averaged a total return of 29.5% in the YTD, bringing their one-year and three-year total returns to 25.2% and 24.7% respectively.

The table below details the 10 best-performing constituents of the iEdge SG All Healthcare Index with market cap above S$100 million, sorted by YTD total return.

Name SGX
Code
Market Cap
(S$)
Total
Return
YTD
%
Total
Return
1 Yr
%
Total
Return
3 Yr
%
ISEC HEALTHCARE 40T 183,431,792 48.6 30.7 36.1
HEALTH MGMT INTL 588 607,045,824 35.1 34.6 16.8
PARKWAY LIFE REIT C2PU 1,942,057,600 25.1 28.6 44.9
HAW PAR CORP H02 2,928,610,048 20.8 8.4 67.5
IX BIOPHARMA 42C 135,364,752 18.0 23.5 -41.7
CORDLIFE GROUP P8A 110,350,816 16.9 -11.1 -61.4
FIRST REIT AW9U 811,229,376 10.3 -4.6 -7.7
SINGAPORE O&G 1D8 164,497,040 4.2 8.8 -36.8
IHH HEALTHCARE Q0F 16,144,142,336 2.8 6.3 -12.8
TIANJIN ZHONGXIN PHARMA T14 1,763,957,078 -0.1 -8.7 17.1
Average 18.2 11.7 2.2

Source: Bloomberg & StockFacts (data as of 11 Oct 2019)







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