Raffles Medical Group Ltd (SGX: BSL) is a private healthcare services provider with operations in Singapore and a number of other Asian countries. In Singapore, the company has its flagship Raffles Hospital. It is also developing two hospitals in the Chinese cities of Chongqing and Shanghai.
At the current price of S$1.02 (at the time of writing), Raffles Medical’s shares are just 1 cent higher than the 52-week low price of S$1.01. This raises a question: Is Raffles Medical cheap now? This question is important because if the firm’s shares are cheap, it might be a good opportunity for investors.
Unfortunately, there is no easy answer. However, we can still get some insight by comparing Raffles Medical’s current valuations with the market’s valuation. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Raffles Medical currently has a PB ratio of 2.5, which is higher than the SPDR STI ETF’s PB ratio of 1.1. Similarly, Raffles Medical’s PE ratio is higher than that of the SPDR STI ETF’s (25.5 vs 10.5). In addition, the healthcare provider’s dividend yield of 2.2% is lower than the market’s yield of 3.0%. The lower a stock’s yield is, the higher is its valuation.
When I put it all together, we can argue that Raffles Medical is trading at a premium to the market, given its higher PB and PE ratios, and lower dividend yield.
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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. Motley Fool has a recommendation for Raffles Medical Group Ltd.