The healthcare sector has traditionally been considered as a defensive segment with good multi-year growth potential, in step with an ageing societal demographic, rising affluence and the continued demand from medical tourism. Continued market volatility and rising US-China trade tensions has also benefitted defensive sectors like healthcare, which has seen inflows from institutional funds recently.
Tracking the performance of healthcare stocks listed on the Singapore Exchange is the iEdge SG All Healthcare Index, a f index that comprises 31 constituents.
The five best-yielding constituents of the iEdge SG All Healthcare Index are: First REIT (6.9%), ISEC Healthcare (4.9%), Singapore O&G (4.9%), Parkway Life REIT (4.8%), and Talkmed Group (3.4%). These five stocks have average indicated dividend yield of 5.0% over the past 12 months, compared to the benchmark Straits Times Index’s (STI) 12 month trailing yield of 4.5%.
For those who are encountering the iEdge prefix for the first time, SGX recently revamped its SGX Index Edge indices with the new iEdge prefix on 3 September 2018. With this new naming convention, SGX will be expanding their market indices services offering into Europe and the Trans-Atlantic region.
Although SGX’s Index Edge service was just launched in October 2015 it has already grown to serve an expanding client base in partnership with leading investment banks, exchanges, asset managers and product issuers. To support this growth, SGX has established an office in London, which will function as the hub for client engagement and support outside of Asia Pacific.
For this week’s instalment of 4 Stocks This Week, we will look at 4 of the largest capitalised stocks within the iEdge SG All Healthcare Index.
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.
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 closed at S$1.13 this week, which gives it a current market capitalisation of S$2.03 billion.
Tianjin Zhong Xin Pharmaceutical Group Corporation Limited (SGX: T14)
Tianjin Zhong Xin Pharmaceutical produces and sells both traditional Chinese and western medicines and healthcare products primarily in the People’s Republic of China under their own brand and white label products to wholesalers. It is currently headquartered in Tianjin, in the People’s Republic of China.
The company is also involved in the manufacture and sale of biological products, biochemical pharmaceutical products, daily use products, as well as the operation of hospitals. In addition, the company provides logistics, stocks, equipment installation, and medicine processing services.
Tianjin Zhong Xin’s stock price was last done at 6.456 CNY (S$1.299), which gives it a market cap of S$998.72 million.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is one of Asia’s largest listed healthcare REITs according to asset size. The REIT owns a portfolio of 50 healthcare-related properties, including hospitals, and facilities used for healthcare research, education, and the manufacture and storage of drugs, medicines and other healthcare goods. Some of the jewels in their portfolio include Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital.
In addition, it has 46 assets located in Japan, including one pharmaceutical product distributing and manufacturing facility in Chiba Prefecture as well as 45 nursing homes and care facilities in various regions of Japan.
Largest single shareholder is another SGX-listed company, IHH Healthcare Berhad (SGX: Q0F), which owns 35.25% of Parkway Life REIT. Parkway Life REIT closed at S$2.68 this week, giving it a market capitalisation of S$1.621 billion.
First REIT (SGX: AW9U)
The majority of First REIT’s portfolio of assets are located in Indonesia (14 in Indonesia, 3 in Singapore and 1 in South Korea), with most of them being hospitals.
For the 2Q2018 ended 30 June 2018, First REIT reported a distribution per unit (DPU) of 2.15 Singapore cents, which represents a 0.5% year-on-year increase. Gross revenue rose 5.3% to S$28.9 million, while net property income increased 5.0% to S$28.5 million. With growing adoption of the national health insurance scheme in Indonesia, First REIT remains well-positioned to take advantage of growing private healthcare demand in Indonesia.
In its results statement, First REIT also highlighted its strong acquisition pipeline of around 40 Indonesian hospitals from its sponsor, PT Lippo Karawaci Tbk. On 16 September, OUE Lippo Healthcare also released a statement that it has agreed to buy 10.6% of First REIT for around S$103 million, and plans to fund the purchase through a S$150 million rights issue.
First REIT closed at S$1.22 this week, which is at a 52-week low.
4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.