2 Stocks With Exposure To Singapore’s Possible Healthcare Spending Growth

In the recent Singapore 2016 Budget, Finance Minister Heng Swee Keat revealed that health care spending in Singapore had soared nearly six-fold over the past decade from $1.9 billion to $11 billion today. He also shared that 1 in 8 Singaporeans are currently above the age of 65 and that the ratio is projected to grow to 1 in 6 in 2020 and 1 in 4 in 2030.

Meanwhile, the 2013 Population White Paper prepared by the government had included forecasts for Singapore’s population growth. By 2020, Singapore’s total population could be between 5.8 million and 6 million and this is expected to further increase to between 6.5 million and 6.9 million in 2030. For perspective, Singapore’s population is 5.54 million as of June 2015.

All these statistics point to the possibility for even higher healthcare-related expenditures for Singapore in the future.

There are a number of companies in Singapore’s stock market that have businesses that are heavily exposed to the healthcare market here. Two such companies are Raffles Medical Group Ltd (SGX: R01) and AsiaMedic Limited (SGX: 505).

Raffles Medical is a comprehensive healthcare provider with a tertiary hospital, specialist clinics, family clinics, and medical centres under its name. In 2015, the company’s revenue had come predominantly from Singapore.

Over the past few years from 2011 to 2015, Raffles Medical has earned an annual return on equity of between 11.5% and 15.1% and had reported four consecutive years of revenue and earnings per share growth. You can see this in the table below:

Raffles Medical revenue, EPS, and ROE table
Source: Raffles Medical Group 2015 annual report

As for AsiaMedic, it had sourced practically all its revenue from Singapore in 2015, according to data from S&P Global Market Intelligence. The company’s business is focused on providing health-screening and medical diagnostics services.

AsiaMedic revenue, EPS, and ROE table
Source: S&P Global Market Intelligence

The firm is still tiny (just S$21 million in revenue in 2015) and it has had trouble generating consistent profits as the table just above shows.

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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 Ong Kai Kiat does not own shares in any companies mentioned.