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Here Are The 3 Highest Yielding Healthcare Stocks

In an earlier article, I shared data from forecasts about Singapore’s healthcare market. I wrote:

“Singapore has an ageing population. In 2015, one in eight Singaporeans were aged 65 and above. In 15 years’ time, the ratio is estimated to grow to one in four, according to government statistics.

Studies have also shown that each elderly Singaporean will spend an estimated average of US$37,427 on healthcare in 2030, which is a hefty 357% increase from the US$8,196 spent in 2015.

Meanwhile, per capita government spending on healthcare in Singapore has grown at a compound annual rate of 15.7% from 2010 to 2015. The government has also projected its healthcare spending to grow to S$13 billion in 2020, up from S$9 billion in 2015.

So, there are clearly many studies that forecast growth for Singapore’s medical industry.”

According to a stock screener provided by bourse operator Singapore Exchange Limited (SGX: S68), there are 13 companies in Singapore’s stock market that are classified under the “Healthcare Providers and Services” industry.

I then sorted the 13 companies by their dividend yields. The three with the highest yields are RHT Health Trust (SGX: RF1U), Vicplas International Limited (SGX: 569), and TalkMed Group Ltd (SGX: 5G3).

rht-health-trust-vicplas-and-talkmed-yield-table
Source: SGX Stock Facts

Let’s have a few words on the three healthcare companies.

RHT Health Trust is a business trust that invests in healthcare-related assets in India. Currently, it has 18 assets in all, 12 of which are clinical establishments. The other assets comprise of four greenfield clinical establishments and two operating hospitals. These assets are worth a total of S$1.129 billion.

While RHT Health Trust has no exposure to Singapore’s healthcare market given that all its assets are in India, it’s worth noting that India’s healthcare market is also forecast to grow. According to a report by KPMG, India’s healthcare market is projected to grow by 16% annually from US$74 billion in 2011 to US$280 billion in 2020.

RHT Health Trust’s interest coverage ratio has fallen significantly, from 30.1 times in its fiscal year ended 31 March 2013 (fiscal 2013) to just 9.1 times in the first-quarter of fiscal 2017. In the first-quarter of fiscal 2017, the trust’s revenue was flat and profit had fallen by 13%.

Vicplas has two major businesses. It develops and manufactures medical devices on one side, and manufactures and distributes plastic piping products on the other.

In Vicplas’ fiscal year ended 31 July 2016 (FY2016), 43% of revenue came fom its medical devices business. The rest came from its plastic pipes business.

During the year, Vicplas saw its operating profit increase by 11.7% to S$9.7 million. The medical devices business suffered an operating loss of S$782,000, but it represented an improvement from the S$2.74 million operating loss seen in the previous year. But, due to higher corporate expenses, Vicplas’ profit for the year fell by 7.6% to S$5.334 million.

In its earnings release, Vicplas commented that it medical device business “faces the challenges of uncertainty and volatility.” While the company is hard at work growing this segment, it acknowledged that some of its efforts will only bear fruit beyond FY2017.

Lastly, we have TalkMed, which was listed only in January 2014. The company’s main business is the provision of oncology services (essentially the treatment of cancer) through its eight private clinics. These clinics are found in Gleneagles and Mount Elizabeth-branded hospitals in Singapore.

From 2010 to 2015, its revenue has grown in each year. All told, TalkMed’s top-line has climbed by 6.3% annually from S$48.3 million in 2010 to S$65.7 million in 2015. The profit picture is a little messier, but it has stepped up by 2.9% per year from S$32.4 million to S$37.3 million over the same period.

TalkMed is highly exposed to Singapore’s healthcare market – 99.5% of its revenue in 2015 was sourced here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore contributor Ong Kai Kiat does not own shares in any companies mentioned.