Is ISEC Healthcare a Buy?

Listed in late 2014, ISEC Healthcare Ltd. (SGX:40T) is considered one of the younger healthcare stocks in Singapore.

The group provides specialist medical ophthalmology services through its network of four eye centres in Malaysia, and one in Singapore’s Gleneagles Hospital. In 2016, the group expanded its services to include general medical services through the acquisition of JLM Companies, which comprises of four clinics in the heartlands of Singapore.

Despite its relative youth under the public eye, ISEC has put together an enviable track record of both top-line and bottom-line growth, whilst maintaining a clean balance sheet.

Rapid revenue and earnings growth

Since its listing in 2014, ISEC Healthcare’s revenue has increased by a compounded annual rate of 13.9% from S$22.0 million to S$38.1 million. At the same time, the group also managed to boost its earnings per share from 0.74 Singapore cents in 2014 to 1.3 Singapore cents in 2017.

The strong growth in both its top-line and bottom-line was due to a larger number of patient visits at its existing eye centres. ISEC Healthcare also benefited from new revenue contributions from a Malaysian eye centre acquisition, and the aforementioned general medicine clinics.

The acquisition of the general medicine clinics not only contributes to the company’s profits but also provides a new source of patients, and referrals for its eye centres.

Strong cash position

As mentioned earlier, ISEC healthcare has a sturdy balance sheet. The company has zero debt on its books and S$27 million in cash. On top of that, the company generates consistently strong cash flow from its operations.

In fact, its cash flow from operations have grown at a tremendous rate of 35% compounded, per annum, from just S$2.5 million in 2014 to S$8.3 million in 2017.

As such, the group is in a good financial position to pursue additional acquisitions and to pay out dividends to shareholders.The company’s track record for acquisitions also show that the management is not afraid to invest in expanding.

Relatively cheap share price

At the time of writing, shares of ISEC Healthcare Ltd. exchanged hands at S$0.29 per share. This translates to a price-to-book ratio of 2.23, an annualised price-to-earnings of 17.7 and a trailing dividend yield of 4.1%.

As it stands, ISEC Healthcare’s valuation is cheaper compared to other healthcare companies such as TalkMed Group and Singapore O&G which have a price-to-earnings ratio of 27 and 18.8 respectively. The company’s 4.1% dividend yield also ranks as the third highest yielding healthcare stock at the moment.

The Foolish bottom line

Despite its youth in the public markets, ISEC Healthcare has shown some potential to be a good investment.

Besides strong patient growth in its existing clinics, the group also the financial muscle to make acquisitions to expand its network and diversify its product offering. In addition, management has also signalled its intentions to increase its regional footprint to countries such as Vietnam and China. These actions could provide further growth catalysts to the company.

Just as importantly, shares of the company currently trade at reasonable valuations. All things considered, ISEC Healthcare is certainly a buy in my books.

Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know--and we've laid them all out in The Motley Fool Singapore's new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge--simply click here now to claim your copy.

Also, 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. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.