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A Simple Overview of Raffles Medical Group Ltd’s Valuation

Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and thirteen cities. Furthermore, it has two hospitals under development in China.

Raffles Medical’s share price has been on a declining mode for the last 12 months, down by almost 27% during the period.

Thus, investors or potential investors may have a question in mind: Is Raffles Medical cheap after its year-long stock price decline?

Here, we will try to answer this question by comparing the current valuation of Raffles Medical to its historical valuation. For this exercise, we will look at three ratios – price to book, price to earnings and dividend yield.

Price to book

Source: Morningstar.com

As we can see from the chart above, price to book ratio for Raffles Medical was between 4.0 and 4.3 for the last four years.

Currently, its price to book ratio of 3.4 times is lower than the low end of the last four years.

Put in simple terms, Raffles Medical is currently trading at a 15-20% discount in comparison to its historical price to book ratio.

Price to earnings

Source: Reuters.com

From the table above, we can see that Raffles Medical traded at P/E ratios of between 20.4 and 35.7 in the past five years.

Presently, the company is trading at P/E ratio of 29.2, which is around the middle of its five years’ historical P/E range.

Thus, if P/E ratio is used as a sole metric, we can see that Raffles Medical is currently trading at a valuation around the mid-range of its five years historical data.

Dividend Yield

 

Source: Reuters.com

Lastly, we will look at a summary of dividend yield as above. Here, we can see that current dividend yield of 1.72% is marginally lower than the five years average of 1.99%.

As we all might know, the lower the dividend yield, the higher the valuation.

As such, we can see that Raffles Medical’s current valuation, on the basis of dividend yield, is marginally higher than its five-year average.

Conclusion:

In all, despite the recent pullback in share price, Raffles Medical is still yet to trade at a cheap valuation compared to its history.

At most, it’s trading at around the middle range of its historical valuation, taking into account its low price to book ratio, mid-range p/e ratio and low dividend yield in relation to the historical data.

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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 has recommended shares of Raffles Medical Limited. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.