When searching for high-growth companies for their portfolios, many local investors prefer to look overseas as there are a limited number of such companies in Singapore. However, that does not mean that there are simply no growth companies in Singapore to choose from. If we dig deep enough, we can sometimes find growth gems in the local stock market that could potentially make worthy investments. In this article, I will introduce two such stocks that I believe have a long runway for growth. The first company is MindChamps Preschool Ltd (SGX: CNE). …
When searching for high-growth companies for their portfolios, many local investors prefer to look overseas as there are a limited number of such companies in Singapore. However, that does not mean that there are simply no growth companies in Singapore to choose from. If we dig deep enough, we can sometimes find growth gems in the local stock market that could potentially make worthy investments.
In this article, I will introduce two such stocks that I believe have a long runway for growth.
The first company is MindChamps Preschool Ltd (SGX: CNE).
Most of us would have probably seen a MindChamps Preschool Centre somewhere around our neighbourhood. The company has been rapidly expanding its network of centres both locally and overseas, with a total of 17 company-owned and 54 franchisee-owned centres.
Listed just a year ago, MindChamps has been one of the fastest growing companies this year, with revenue and operating profit up by 58% and 34% respectively.
It is continuously making acquisitions and positioning itself for global expansion, acquiring 11 preschool centres in Australia. The company is also actively looking for franchise partners to supplement its expansion. It recently inked a Master Franchise Agreement with Victoria Education Sdn Bhd to run 20 preschool centres in Malaysia.
As of 30 September, MindChamps Preschool Ltd had sold a total of 180 franchise licenses, with 54 in operation. As such, there are 126 centres yet to be established. As Mindchamps collects recurring revenue from franchisees through school fees, royalty fees, sales of merchandise and school event income, the large number of franchise centres in the pipeline will provide additional recurring income in the future.
In addition, the company has plenty of capital to continue making acquisitions to fund its growth. In its initial public offering (IPO) last year, it stated that it allocated S$34.5 million of capital to fund acquisitions. So far, it has only spent S$12 million on acquisitions, with S$22.5 million yet to be utilised. All of the above bode well for its future.
Mindchamps’ share price is at S$0.52 at the time of writing. At this price, its stock has a price-to-earnings multiple of 24.5 and a price-to-book ratio of 2.1.
The next company is Raffles Medical Group Ltd (SGX: BSL).
From its humble beginnings as just a two-clinic operation, Raffles Medical has grown to become one of the largest private healthcare providers in our country. It currently operates a network of clinics (both local and overseas), a hospital and a specialist centre in Singapore.
Still helmed by its founder Dr Loo, Raffles Medical has had an impressive track record of growth, with net profit more than quintupling from S$12 million in 2005 to S$69.3 million in 2015.
More pertinently, the group continues to plant the seeds of growth for the future. Raffles Medical’s first two hospitals in China – one in Chongqing and the other in Shanghai – are set to open at the end of this year and in the second part of 2019 respectively. China has one of the fastest growing middle-class populations in the world and the demand for private health care is increasing at a fast tick. As such, if the two new hospitals are successful, it could open up more doors for the company.
Raffles Medical shares have dipped in recent years due to limited growth in its core market in Singapore. However, with the opening of the two new China hospitals, I am expecting a turnaround ahead. Currently, Raffles Medical shares trade at S$1.16 per piece, nearly 30% off its peak. At that price, it has a price-to-earnings multiple of 28, a price-to-book ratio of 2.7 and a dividend yield of 1.96%.
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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 Jeremy Chia owns shares in Raffles Medical Group. Motley Fool Singapore has a buy recommendation for Raffles Medical Group.