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Healthcare Stocks in SGX: IHH Healthcare (SGX: Q0F), Raffles Medical (SGX: BSL), Thomson Medical (SGX: A50), TalkMed (SGX: 5G3)

As Singapore’s population becomes older, these healthcare stocks will play an important role in addressing the healthcare needs of our country.

Investing in healthcare stocks presents a compelling opportunity due to several key factors.

Firstly, healthcare is a relatively stable and defensive industry. People need medicine and medical services regardless of economic conditions, making this sector less affected by economic cycles. This resilience provides a reliable foundation for investors.

The growing demand for healthcare services also supports the sector. Demographics are on the side of healthcare, with the global population (including Singapore) ageing and the prevalence of chronic diseases such as diabetes, heart disease, and cancer rising. This creates a long-term tailwind for the industry, as companies continuously develop new treatments and technologies to meet these growing needs.

Innovation is another driving force in the healthcare sector. Significant investments in research and development lead to the creation of new drugs, medical devices, and treatment methods. Advances in biotechnology, such as gene therapy and personalised medicine, offer new avenues for substantial growth and improve patient outcomes.

The potential for high returns from healthcare stocks is significant, with successful innovations and frequent mergers and acquisitions driving stock prices higher. Additionally, healthcare investments align with environmental, social, and governance (ESG) principles, appealing to socially conscious investors.

For investors looking to explore the healthcare sector, the Singapore Exchange’s iEdge SG All Healthcare Index is a valuable resource. This index consists of 37 healthcare stocks and measures the performance of these healthcare stocks that are  listed in Singapore. It includes healthcare providers, manufacturers and distributors of medical equipment, pharmaceutical companies, biotechnology companies, and healthcare asset owners, offering a diverse range of investment opportunities.

Below is a list of the top 10 stocks part of the iEdge SG All Healthcare Index:

Source: Singapore Exchange

In this edition of 4 Stocks This Week, we look at four healthcare stocks within the iEdge SG All Healthcare Index, which are mainly involved in running hospitals and/or clinics — IHH Healthcare (SGX: Q0F), Raffles Medical (SGX: BSL), Thomson Medical (SGX: A50) and TalkMed (SGX: 5G3).

IHH Healthcare (SGX: Q0F)

IHH is one of the largest healthcare networks in the world, with over 80 hospitals in 10 countries. In Singapore, it owns the Mount Elizabeth, Gleneagles, and Parkway brands.

Source: IHH

For the first quarter of 2024, IHH reported its highest-ever quarterly revenue, with the top-line increase by 16% year-on-year to RM 6.0 billion.

Correspondingly, net profit, excluding one-off items, grew 22% to RM 402.8 million. Headline net profit, however, fell 45% due to one-off gains in 2023 for the sale of International Medical University (IMU) for RM 862 million.

For the financial year ended 2023, revenue grew 16% year-on-year to RM 20.9 billion while net profit (without one-off items) fell 7% to RM 1.3 billion. The total dividend for 2023 stood at 18.6 sen per share, including a special dividend of 9.6 sen per share.

Looking ahead, the healthcare provider “expects continued revenue growth fuelled by healthcare megatrends”. It added that it will focus on driving profitability and sustaining healthy return on equity (ROE) while managing its capital carefully and reducing the effects of inflation and interest rates.

The group also has plans to add close to 4,000 new beds by 2028 across its network.

Source: IHH Investor Presentation

At IHH’s share price of S$1.80, it has a price-to-earnings (P/E) ratio of 24x and a dividend yield of 1.44%.

Raffles Medical (SGX: BSL)

Raffles Medical Group is one of the largest private healthcare groups in Singapore. Established in 1976, it operates beyond our shores in 14 cities across five Asian countries.

Unlike IHH, Raffles Medical ended 2023 on a weaker note. For the year, revenue fell 14.1% year-on-year to S$706.9 million, largely due to lower revenue from its Healthcare Services division offset by growth in its Hospital Services division. Raffles Medical’s Healthcare Services division saw reduced COVID-19-related activities for the year compared to 2022, which hit the top line.

Revenue from China increased by 18.1% to S$59.3 million in 2023. Since its hospitals in Shanghai and Chongqing are still in developmental phases, they continued to incur gestational losses.

Overall, Raffles Medical’s net profit fell by 37.1% to S$90.2 million in 2023. The company declared a first and final dividend of 2.4 cents per share for the year, translating to a payout ratio of around 50%.

As for its outlook, Dr Loo Choon Yong, executive chairman of Raffles Medical, said the following in the company’s earnings release:

“We are cautiously optimistic in our 2024 outlook. Despite geopolitical and economic headwinds, we see a growing demand for quality healthcare services in Singapore and the region. With our multispecialty Group Practice, we provide seamless care as a team. Our operational strengths and agility enable us to meet the evolving healthcare and wellness needs of those we serve and care for in Asia.”

Raffles Medical shares last changed hands at S$1.01 each, giving a P/E ratio of 21x and a dividend yield of 2.4%.

Thomson Medical (SGX: A50)

Thomson Medical Group is a healthcare provider in the South-East Asian region with operations in Singapore, Malaysia and Vietnam. It’s the owner of one of the largest private providers of healthcare services for women and children in Singapore, Thomson Medical Pte Ltd.

Source: Thomson Medical Investor Presentation

For the half year ended 31 December 2023 (1H2024), revenue tumbled 8.6% year-on-year to S$168.1 million, largely due to lower revenue in Singapore on the back of completion of short-term service contracts related to running transitional care facilities. This was offset by higher revenue from Malaysia, which rose 21% from continued momentum due to an increase in new beds.

With lower operating profits and higher finance costs, net profit plunged 91% to S$2.0 million.

Thomson Medical acquired Far East Medical Vietnam Limited (FEMVN) in December 2023, which provides care across more than 30 medical specialties and has close to 200 operating beds, with a new expansion wing launching next year. The company said that the acquisition will be immediately accretive to its net profit.

Kiat Lim, the group’s executive vice-chairman, mentioned in its latest earnings:

“With the recent completion of the acquisition of FEMVN, TMG [Thomson Medical Group] now has a stronghold in each of South-East Asia’s most important healthcare markets. We will deepen our reach within each market and also continue to look at the right high-value partnerships and acquisitions that align with our strategy across the region.”

At Thomson Medical’s share price of S$0.05, it has a P/E ratio of 83x and a dividend yield of 0.8%.

TalkMed (SGX: 5G3)

TalkMed provides medical oncology, stem cell transplants and palliative care services, serving patients in Singapore and the region. Outside our country, it operates in Vietnam, Hong Kong and China.

For the financial year ended 2023, TalkMed’s revenue grew 9.4% year-on-year to S$83.8 million. The increase was mainly driven by an influx of foreign patients to its flagship oncology services segment in Singapore, contributing almost 97% of its total revenue.

Even though operating expenses increased for the year, TalkMed’s net profit for 2023 rose 5.3% to S$32.2 million.

With that, the healthcare outfit distributed a total dividend of 2.20 Singapore cents per share for 2023, translating to a dividend payout ratio of 90.6%.

Looking ahead, TalkMed’s chairman Chandra Das, mentioned:

“With connectivity expected to be back at its optimal level in 2024, the Group is well-positioned to take in the higher patient influx. We will continue to focus on faster and more efficient client servicing across our medical centres. As a key player in the region’s medical hub, we aim to streamline our processes and optimise efficiency in delivering cancer treatments to our patients.”

At TalkMed’s share price of S$0.38, it sports a P/E ratio of 16x and a dividend yield of 5.7%.

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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.