iFAST Corporation Ltd (SGX: AIY) and Raffles Medical Group Ltd (SGX: BSL) have seen their share prices fall hard from their respective peaks. But, I believe that these two companies could go on to trounce the market in the years to come. Here’s why.
Company 1: iFAST
iFAST is an Internet-based investment products distribution platform that provides a comprehensive range of investment products and services to both corporate clients and retail investors. At the time of writing, iFAST’s shares are exchanging hands at S$1.06 apiece, which is down 32% from a peak of S$1.565 seen in May 2015.
Mrs. Market may have been spooked by the losses the company is currently making in its China business. In 2017, iFAST’s China operations posted a loss, just like in 2016. However, the company’s business in China is still in its infancy as it was launched only in 2016. It will take time for iFAST’s operations in the country to stabilise.
Lim Chung Chun, the chairman and chief executive of iFAST, said the following in the company’s 2017 annual report:
“Some shareholders have been concerned about the operating losses that we are currently incurring for China. The reality is that the nature of the investment platform business is such that losses are expected in the first few years of the set up before a critical mass is achieved. We see this initial phase as an important investment for the long run. China is expected to be the biggest wealth management market in Asia, and it is a market that we should not ignore.”
iFAST expects losses from China in 2018, and for the losses to be comparable to that in 2017. In the coming years, though, iFAST thinks that China can be an important contributor to its overall business. Given the company’s track record, I think iFAST can amass the critical mass needed in China to turnaround its operations.
Company 2: Raffles Medical
Raffles Medical is one of the largest private healthcare groups in Singapore. Established in 1976, it now operates in a total of 12 cities across Singapore, China, Japan, Vietnam, and Cambodia.
The company’s stock has not been doing well in recent times. From an all-time high of S$1.675 seen in May 2016, Raffles Medical’s shares are changing hands at S$1.02 each now – that’s a fall of nearly 40%.
One of the main reasons for this poor performance is that Raffles Medical’s business growth has slowed down tremendously. From 2014 to 2017, the company’s earnings per share came in at around 4.0 Singapore cents in each year. The market may also be worried about the start-up losses that the company is likely going to suffer when it opens its new hospitals in China.
However, it is the China hospitals that I feel will fuel growth for Raffles Medical over the long run. The private healthcare services provider is developing a 400-bed international general hospital in Shanghai, and a 700-bed international tertiary general hospital in Chongqing. The hospitals are scheduled to open in the second half of 2019, and the fourth quarter of 2018, respectively. Yes – start-up losses will be incurred. But if investors have a long term mindset, the losses are necessary to position the company for future growth. In other words, this is some short-term pain for long-term gains.
To give context for the potential that Raffles Medical has in Shanghai and Chongqing, Singapore’s population was just 5.5 million in 2015 whereas the two Chinese cities had populations of 30.2 million and 24.2 million, respectively. The sheer size of the market in China should ensure that Raffles Medical does not stay anaemic for long.
The Foolish takeaway
One of the greatest investors of all-time, Warren Buffett, mentioned the following more than 30 years ago:
“The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.”
When the picture becomes clearer in the future for iFAST and Raffles Medical, they may be selling for much higher prices and valuations compared to today. Sometimes, it pays to be a contrarian.
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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 iFAST Corporation Ltd and Raffles Medical Group Ltd. Motley Fool Singapore contributor Sudhan P owns shares in iFAST Corporation Ltd and Raffles Medical Group Ltd.