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Health Management International Ltd Stock Is Up 510% In 5 Years: Does It Have A High Quality Business?

Health Management International Ltd (SGX: 588) is a healthcare services provider with a presence in Singapore, Malaysia, and Indonesia.

It owns and operates two hospitals in Malaysia (the Mahkota Medical Centre in Malacca and Regency Specialist Hospital in Iskandar Malaysia) with a total bed capacity of more than 500.

The company also has a healthcare training centre in Singapore, the HMI Institute of Health Sciences. It provides Skills Future Singapore accredited training courses for the healthcare support sector.

Over the past five years, Health Management International’s stock price has climbed by a massive 510%. This led me to take a closer look at the company’s business. In here, I want to share what I found about the company’s return on invested capital (ROIC).

An overview of the ROIC

The ROIC is a metric that can help investors gauge the quality of a business.

The simple idea behind the ROIC is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs while the reverse is true – a low ROIC is often associated with a low-quality business.

You can see how the math works for the ROIC in the formula above.

Health Management’s ROIC

The table below shows the ROIC for Health Management using its financials for its fiscal year ended 30 June 2016 (FY2016):


Source: Health Management 2016 Annual Report

We can see that Health Management International has a ROIC of 46.2%. That’s an impressive ROIC and is higher than the average, based on the many companies I’ve looked at in the past. This suggests that Health Management International has a high quality business.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.