Healthcare companies are generally considered as defensive stocks since their services are needed when the economy’s good as well as bad. The defensive nature of their businesses also makes healthcare companies attractive to investors.
There are many healthcare companies in Singapore’s stock market and you might want to know which is a better investment opportunity. There’s no easy answer, but I want to directly compare the important business and valuation aspects of two healthcare services providers – Raffles Medical Group Ltd (SGX: BSL) and Singapore O&G Ltd (SGX: 1D8) – in a mini article-series.
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This article is the second in the series and it compares the long term track record of growth for the two companies; the objective is to find out which of the duo did a better job in growing its business over a five-year period. The first article in this series compared the most recent quarterly earnings updates of the two healthcare companies.
Raffles Medical is a leading integrated private healthcare provider in the region. In Singapore, it has a large network of clinics and medical centres, in addition to its flagship Raffles Hospital, which provides tertiary medical care. The company also has medical facilities beyond Singapore in 12 cities across China, Japan, Vietnam, and Cambodia. The medical facilities in China include two hospitals that Raffles Medical is developing in Chongqing and Shanghai; the hospitals are expected to be completed in the fourth quarter of 2018 and the second half of 2019, respectively.
Meanwhile, Singapore O&G is a specialist healthcare services provider that has a focus on women’s health. The company has four business arms: Obstetrics and Gynecology; Cancer-related; Pediatrics; and Dermatology. Singapore O&G sources all its revenue from Singapore at the moment.
From 2013 to 2017, Raffles Medical’s revenue climbed by a total of 40.0% from S$341.0 million to S$477.6 million. Its profit after tax and minority interests (PATMI) only increased by 9.8% over the same period, from S$64.5 million to S$70.8 million.
Meanwhile, Singapore O&G’s revenue had jumped by 247.7% from S$8.6 million in 2013 to S$29.9 million in 2017; this translates to an impressive compound annual growth rate of 36.6%. Singapore O&G’s net profit also grew by an impressive 174% from S$3.1 million to S$8.5 million.
The Foolish conclusion
It’s fair to say that both Raffles Medical and Singapore O&G managed to deliver long-term growth. But it’s clear that Singapore O&G produced the better growth rates. With that, stay tuned for the next installment of my series as I try to discover which of the two companies would be a better investment opportunity – the next piece will be coming soon! [Editor’s note: The third article in the series has been published. It can be found here.]
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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. The Motley Fool Singapore has a recommendation on Raffles Medical Group.