3 Reasons Behind Singapore O&G Ltd’s 228% Gain In 1 Year

Singapore O&G Ltd (SGX: 41X) is a healthcare services provider that specialises in women’s wellness. The O&G in its name is an abbreviation of “obstetrics and gynaecology.”

The company can be considered to be a small stock in Singapore’s market given its market cap that’s south of S$200 million. But, it has had a big performance over the past year or so since its initial public offering (IPO) on 4 June 2015 – Singapore O&G’s shares are worth S$0.82 each today, which equates to a gain of 228% from the listing price of just S$0.25.

Here are three possible reasons behind Singapore O&G’s big impact on the stock market in its first year as a listed entity:

1. A roster of quality healthcare professionals

Singapore O&G was founded by Dr. Lee Keen Whye, Dr. Heng Tung Lan, and Dr. Victor Ng, who’s currently the company’s chief executive. The three are all experienced and credentialed healthcare professionals.

Dr. Lee was previously the Chairman of Gleneagles’ Minimally Invasive Surgery Centre and President of the Obstetrical and Gynaecological Society of Singapore. Meanwhile, Dr Heng is a leading Consultant Obstetrician and Gynaecologist at Parkway East Medical Centre. As for Dr. Ng, he is a serial entrepreneur who also had a successful GP practice.

As the company grew over the years, it has been recruiting more and more specialists. In 2015, Singapore O&G had managed to deliver 6.7% of all the babies delivered in Singapore’s private sector. This is an improvement over the 5.4% market share that the company had in 2014.

2. The right amount of freedom and systems in place

Doctors in Singapore O&G have the freedom to decide on many issues such as their clinic’s own staffing levels, bonus pool, medical stock, and patient mix. But, the doctors are also subjected to strict controls in certain areas, such as financial systems and internal controls. Singapore O&G calls its operating philosophy the ‘bird-cage’, meaning doctors are allowed to ‘fly’ anywhere only within the bird cage.

The company also has an internal Management Information System which allows doctors to extract data and also track medicine usage. Singapore O&G also started a project in 2015 to implement an Enterprise Risk Management (ERM) system to manage financial and operational health and safety risks. Eric Choo, Singapore O&G’s financial controller, wrote in the company’s latest annual report that “of the many risks identified, an equal number of controls are already in place.”

3. Cost Consciousness

Singapore O&G tracks its expenses as a portion of its revenue to ensure that it is not just growing its top-line, but doing so profitably. This cost consciousness can be seen in the company’s net profit margin increasing from 31.1% in 2014 to 32.2% in 2015.

At Singapore O&G’s current share price, it has a trailing price-to-earnings ratio of 30. That’s over twice the market’s PE of 12 and thus can be seen as a sign that the market is pricing Singapore O&G as a rising star in the medical industry. Let’s see if the company can deliver the growth that the market’s expecting.

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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.