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Valuations of Stocks in the Singapore Healthcare Sector

According to the Singapore Economic Development Board, Singapore has the world’s fourth best healthcare infrastructure. Partly due to that, many tourists come to Singapore from all over the world to get treated by some of the best doctors here. Some of the hospitals they visit include those owned by Raffles Medical Group Ltd (SGX: BSL) and IHH Healthcare Bhd (SGX: Q0F).

Apart from the two listed companies, there are a number of other healthcare stocks listed on the Singapore stock exchange and they are HC Surgical Specialists Ltd (SGX: 1B1), Health Management International Ltd (SGX: 588), Healthway Medical Corp Ltd (SGX: 5NG), ISEC Healthcare Ltd (SGX: 40T), Q & M Dental Group (Singapore) Limited (SGX: QC7), Singapore Medical Group Ltd (SGX: 5OT), Singapore O&G Ltd (SGX:1D8) and TalkMed Group Ltd (SGX: 5G3).

Below is a table of comparison of the valuations of the companies mentioned (sorted according to alphabetical order):Source: S&P Global Market Intelligence and author’s calculations (data as of 7 Sept 2017)

The cheapest stock in terms of P/E ratio is Q & M Dental, which is going at 13.1 times its trailing earnings.

For the second quarter ended 30 June 2017, the private dental practice saw revenue from its dental and medical clinics decrease by 7% year-on-year to S$27.3 million, mainly due to the deconsolidation of Aoxin Q & M Dental Group Ltd (SGX: 1D4) from a subsidiary to an associate in April 2017.

Meanwhile, net profit surged by 269% to S$13.6 million. The ballooning was mainly due to a one-time gain of S$16.9 million from spinning off Aoxin, which was offset by provisions for impairment of goodwill and asset held for sale, provision on impairment on other receivables, and provision for legal and due diligence fees.

With a P/B ratio of 0.8, Healthway Medical Corp Ltd is the least expensive stock. However, it is cheap for a reason. For the second quarter ended 30 June 2017, it went into a loss of S$2.6 million, even though revenue rose 9.8% year-on-year to S$25.5 million. A year ago, it clocked in a net profit of S$55,000.

Last but not the least, ISEC Healthcare Ltd is the cheapest stock in terms of dividend yield. The firm, which yields 4.1%, has a team of 25 doctors providing specialist medical eye care services.

For the three months ended 30 June 2017, net profit was at S$1.95 million, on the back of a 12% year-on-year increase in sales. The company said that the uptick in revenue was due to the acquisition of JLM companies in December last year. To learn more about the second quarter earnings, you can head here.

Even though Singapore has a top-notch medical sector, competition from regional peers and rising treatment costs have caused a dent in medical tourism here. This is something that investors in the healthcare sector should be mindful of.

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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 Raffles Medical Group Ltd and Singapore Exchange Limited. Motley Fool Singapore contributor Sudhan P owns shares in Raffles Medical Group Ltd.