There are around 700 companies listed on the stock exchange in Singapore. Out of those, there are a number of companies that have similar business operations. It is sometimes hard to determine which company in a particular industry is better than its peers. In this article, we will make some quick-and-dirty comparisons between two companies operating in the healthcare sector, Raffles Medical Group Ltd (SGX: BSL) and IHH Healthcare Bhd (SGX: Q0F), to determine which might give you a better bang for the buck. Introducing the Contenders Raffles Medical Group, or RMG, is the largest integrated private healthcare group in…
There are around 700 companies listed on the stock exchange in Singapore. Out of those, there are a number of companies that have similar business operations. It is sometimes hard to determine which company in a particular industry is better than its peers.
In this article, we will make some quick-and-dirty comparisons between two companies operating in the healthcare sector, Raffles Medical Group Ltd (SGX: BSL) and IHH Healthcare Bhd (SGX: Q0F), to determine which might give you a better bang for the buck.
Introducing the Contenders
Raffles Medical Group, or RMG, is the largest integrated private healthcare group in Singapore. Established in 1976, it now has a presence in 13 cities across Asia, serving more than 2.2 million patients and 6,800 corporate clients.
Meanwhile, IHH Healthcare is one of the largest healthcare groups in the world by market capitalisation. It provides premium integrated healthcare services in Malaysia, Singapore, Turkey, and India. It also has an increasing presence in China and a growing network across Asia and Central and Eastern Europe, the Middle East and North Africa.
The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as of the closing prices on 19 December 2017.
Do note that all figures quoted in the tables that follow are for the full year ended 31 December 2016 (FY2016) for both companies, unless otherwise stated.
Round 1: Profitability
In the first round, we will analyse the profitability of the companies in terms of net profit margin and Return on Equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.
For every dollar of revenue created by RMG, around 15 cents were generated as profits, but for HMI, every dollar of revenue only gave close to six cents in profits. This shows that RMG is more efficient at converting sales into actual profits. RMG has a higher ROE than IHH too.
Round 2: Growth
In the second round, we will compare the compounded annual growth rate (CAGR) of revenue, net profit and dividend of the two firms for the past five financial years. Companies that can grow their sales and profits steadily over time should also see their share price rise.
RMG has trounced IHH in all aspects, except for dividend CAGR. IHH was listed in 2012 and only started paying dividends from 2014 onwards. In that year, it paid out two sen while in 2016, it paid out three sen.
Round 3: Valuation
As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price.
We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two businesses. The values below are as of the closing prices on 12 December 2017.
RMG is valued lower than IHH in all three aspects.
The Foolish Bottom Line
The final score is 3-0 to RMG, as it has triumphed over IHH in all the rounds – profitability, growth and valuation.
However, we have yet to look at other important aspects of the companies, such as their balance sheet strength, ability to generate free cash flow, future growth prospects, and more. Potential investors interested in the two companies should conduct deeper research before investing their money. Who knows, IHH may have better growth prospects than RMG due to its wider geographical reach.
This Foolish Face-Off serves as a useful starting point and helps take some heavy-lifting off your back. If you are keen to find out more about how other businesses in the same industries stack up against each other, do stay-tuned for more Foolish Face-Offs.
For more (free!) stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.
Like us on Facebook to follow our latest hot articles.
The Motley Fool's purpose is to help the world invest, better.
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. Motley Fool Singapore contributor Sudhan P owns shares in Raffles Medical Group Ltd.