When investing, we often encounter companies with grand growth plans and lofty ambitions, but they often end up being overly optimistic. Management at such companies may chase short-term profits at the expense of long-term sustainable growth, and investors should do themselves a favour by steering clear of them.
On the other hand, businesses that are able to articulate clear strategies for sustainable growth should definitely be on your investing radar. Though such companies may seem slow and unexciting at first, their ability to execute on a long-term growth plan means investors can enjoy many years of steady growth, all while having the peace of mind that management is competent and prudent.
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Here are two businesses that have communicated a clear, coherent strategy for long-term growth.
No. 1: Raffles Medical Group
Raffles Medical Group Ltd (SGX: BSL) is an operator of hospitals and a chain of clinics. The group is present in 13 cities in Singapore, China, Japan, Vietnam and Cambodia. RMG operates a hospital in Singapore, Raffles Hospital, and has also recently constructed a hospital in Chongqing, China, that began operations in January this year. The group is in the process of constructing a second hospital in Shanghai, China, which will be operational by early 2020.
Dr Loo Choon Yong, the CEO of RMG, has articulated his plans for the long-term growth of the group through expansion and growth in China. Raffles Hospital Chongqing will be the first hospital to be owned and operated by RMG, and it acts as a testbed for the group’s Chinese expansion. The 700-bed hospital will be progressively ramping up over the months until it is fully operational.
The new hospital in Shanghai will have 400 beds and will also open progressively, starting with 200 beds. Loo has mentioned during RMG’s recent annual general meeting that should this business model work well, the group is looking to expand into other cities in China as there is strong demand for a private healthcare institution of Raffles’ reputation and track record. Loo has a 10-year plan for growing steadily in China and plans to build more hospitals there over time, as he sees sustained and increasing demand for quality healthcare.
No. 2: iFast Corporation
iFast Corporation Limited (SGX: AIY) is a financial technology (fintech) company that owns a platform for the sale and distribution of financial and investment products such as equities, bonds, and unit trusts (mutual funds). The group has a business-to-consumer (B2C) division and a business-to-business (B2B) division.
The group has been growing its assets under administration (AUA) steadily over the years, and AUA recently hit a record high of S$8.75 billion as of 31 March 2019. CEO Lim Chung Chun has reiterated that Asia has massive potential for the asset-management business, as China is minting new millionaires at a rapid pace. The strong demand for wealth management solutions means iFast should see strong business momentum in growing in AUA in the coming years.
Management has a 10-year target for AUA to hit S$100 billion by the year 2028. Though this target is not set in stone and represents a long-term goal for the group, the CEO believes iFast is able to realistically achieve this as there is still a lot of untapped potential in the many markets in Asia.
Management is not short-term driven
The two examples above show that the management teams at these companies are not driven by short-term goals, but have a vision for growing their businesses sustainably and steadily five to 10 years into the future. Investors should seriously consider such companies for long-term investment as such actions demonstrate that management is prudent and wants to grow the company slowly, rather than gunning for explosive but ultimately unsustainable growth.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of iFast Corporation Limited and Raffles Medical Group Ltd. Motley Fool Singapore contributor Royston Yang owns shares in iFast Corporation Limited and Raffles Medical Group Ltd.