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The Healthcare Industry – Medical Equipment and Medical Suppliers

doctor tools Most of us have been in a doctor’s office at some point in our lives. We would have seen the doctor with his stethoscope and other medical equipment in the room.  How many of us have you wondered about the companies producing the stethoscope, rubber gloves, and other medical equipment?

There is more to the Health Care Industry than you might realise. In this series of Sector Connect articles, we’ll be exploring the Healthcare Industry and its players in a series of articles. We started by taking a look at the industry itself, followed by a check up on the Health Care Service Providers.

According to the Industrial Classification Benchmark (ICB), a system used to categorise over 70,000 companies worldwide, the Health Care Industry is made up of the two sectors, which are further divided into various subsectors.

In this article, we will cover companies under the Medical Equipment and Medical Supplies subsectors.

According to the ICB, companies that fall under the Medical Equipment and Medical Supplies subsector are defined as manufacturers and distributors of medical devices or medical supplies used by health care providers and the general public. Let’s take a look at some of the stocks listed in Singapore.

Company

Market Cap (M SGD)

1 Year Share Performance (%)

Price per Earnings (P/E)

Net Profit Margin (%)

Dividend Yield (%)

Biosensors International Group (SGX: B20)

1,528.55

-27.05

12.72

28.79

2.86

Riverstone Holdings (SGX: AP4)

233.44

56.48

12.33

13.63

3.91

Medi-Flex Limited (Catalist: 5FF)

102.15

23.82

24.93

9.12

1.07

Figures are based on trailing twelve months (ttm) results

Biosensors International Group Ltd (SGX: B20) develops and manufactures medical devices used in interventional cardiology and critical care procedures. Since 1990, Biosensors has focused on the niche sector of making a range of devices that are used during heart surgery and intensive care treatment and monitoring.

The share price of Biosensors has fallen almost a quarter due to evident headwinds from numerous fronts: government-mandated price reductions, mounting cost pressures driven by fierce competition and the poor contribution from licensing and royalties revenue.

On the other hand, Biosensors remains committed to expand its product line offerings and develop new revenue streams through acquisitions like Spectrum Dynamics, a business complementary to Biosensors. Further catalysts can come from the fervour in share repurchases from the company and the picking up of sales in the upcoming quarters.

Next up, we have Riverstone Holdings Limited (SGX: AP4) a leading glove maker headquartered in Malaysia, exporting to customers worldwide. Established in year 1989, Riverstone specialize in the production of clean-room products for use in highly controlled and critical environments such as healthcare gloves, face masks, jumpsuits etc.

The share price of Riverstone has soared a spectacular 56% amid strong earnings growth and a steady dividend payout over the years. Even after the surge in price, Riverstone still delivers an attractive dividend yield of 3.91% as of 16th August 2013.

In addition, Riverstone is expected to benefit from the good outlook ahead. According to Research and Markets, global demand for rubber and nitrile gloves is growing more than 10% a year, thanks to increased spending from the semiconductor and healthcare industries where Riverstone generates around 80% of its revenue from.

Lastly, we have another manufacturer of cleanroom gloves – Medi-Flex Limited (Catalist: 5FF). Similar to Riverstone as mentioned earlier, Medi-Flex produces and sells a wide range of disposable gloves with its operations in Singapore and Malaysia and exports to North America, Europe, and Asia.

Stronger set of results released for the past few quarters may have given rise to the 23.82% jump in its stock price. Based on the latest 3Q results, net profits for the 9M 2013 have skyrocketed 258% as compared to the prior year.

According to the Chairman of Medi-Flex, Mr. Tan Sri Lim Wee Chai, said that “the improved performance was due to the increase in demand for natural rubber and nitrile gloves from all the regions, competitive pricing, increased efficiency coupled with the favourable latex prices and foreign exchange trends which further enhanced earnings and profit margins”.

Foolish Bottom Line

While we may not be the direct end users of the products manufactured by the medical suppliers (doctors and clinics are); we can and should do our due diligence before investing in this sector. You never know, you might just find a hidden gem.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.   Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.