Raffles Medical Group Ltd (SGX: BSL) runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and 14 cities. Also, it has two hospitals (one under development) in China.
In the last five years, investors have seen Raffles Medical’s share price decline by roughly 25%. This must have been frustrating for those investors, especially those who are accustomed to Raffles Medical’s strong share price growth. Yet, there are still good reasons to believe that the healthcare provider’s best days are ahead of it. Here are two of those reasons.
Provision of necessary services
Healthcare companies like Raffles Medical are generally considered as defensive stocks since their services are needed in both good and bad times. Moreover, the demand for such services will generally grow over time due to the general growth in population, as well as other factors like an ageing population, higher disposable income and others.
In the short term, investors might be persuaded to react to market noise (such as news on increased competition from neighboring countries) by selling Raffles Medical’s stock. However, they should not forget that Raffles Medical operates in an industry with favourable tailwinds and, thus, it should continue to benefit from such tailwinds over the long term. After all, who doesn’t need its services?
Historically, Raffles Medical has been a favourite of growth investors. Nowadays, there are signs that such investors might have given up on such hope. Yet, there are still good reasons to believe that Raffles Medical can grow. Firstly, it can grow its patient numbers by utilising the spare capacity of its existing facilities in Singapore. Next, it can expand its existing infrastructure to increase its capacity – such as its recent extension of its flagship Raffles Hospital in Singapore. Also, it can also open up new facilities, such as clinics to cater for more patients locally.
Another major growth driver for the company is its recent expansion into China through two major projects – a 400-bed international general hospital in Shanghai and a 700-bed international tertiary general hospital in Chongqing. The latter opened its door for business in January 2019 while the construction of the Shanghai hospital will be completed by fourth quarter of this year. In short, there is no shortage of growth going forward!
Investor sentiment towards Raffles Medical Group might not be positive. Yet, those who are willing to invest for the longer term might want to consider the merits of the company and its growth opportunities.
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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 recommended shares of Raffles Medical Group Ltd.