The healthcare sector is a great place to find stable investments with long-term growth, given that this sector is somewhat recession-proof (along with education) because there is always consistent demand for healthcare services. Healthcare has many subsets, from medical devices to hospital services, and it encompasses a range of different disciplines and specialities.
Singapore Exchange Limited, or SGX, highlighted a list of 19 healthcare companies on the exchange with total market capitalisations of more than S$20 billion. Over the last seven months (up till 31 July 2019), the 10 largest healthcare services providers averaged a total return of 5.7% (including both capital gains and dividends).
Here are three healthcare stocks that registered the highest total return year to date (YTD).
1. ISEC Healthcare Ltd
ISEC Healthcare Ltd (SGX: 40T) is a comprehensive medical eye care service provider. ISEC stands for “international specialist eye centre,” and the group has ambulatory surgical centres in Malaysia and also provides specialist medical ophthalmology services to Lee Hung Ming Eye Centre in Gleneagles, Singapore. As of 31 March 2019, the group employed 26 specialist doctors and 6 general practitioners.
In terms of expansion plans and business development strategies, the group intends to recruit and retain highly qualified and talented healthcare professionals to increase its pool of doctors. For geographic expansion, Indonesia, Myanmar, Vietnam, and China have been identified as target countries in which the group is to establish a presence.
The group registered a YTD return of 45.2%. Its shares currently trade at a dividend yield of 4.5% and a price-to-earnings ratio of around 21 times.
2. Health Management International Ltd
Health Management International Ltd (SGX: 588), or HMI, is a regional private healthcare provider that operates in Singapore, Malaysia, and Indonesia. The group owns two tertiary hospitals in Malaysia, a healthcare training centre in Singapore, and a one-stop ambulatory care centre, StarMed Specialist Centre.
HMI’s total return was 34.1% YTD, but note that this was due to an offer by PanAsia Health Limited to privatise HMI under a scheme of arrangement for S$0.73 per share (a 30% premium to the volume-weighted average price of S$0.56). This example also shows that investing in well-run businesses that are undervalued may result in a privatisation bid at a significant premium to the last traded share price.
3. Singapore O&G Limited
Singapore O&G Limited (SGX: 1D8) is a group of specialist medical practitioners that are dedicated to women and children’s health and wellness. SOG consists of four operating segments: obstetrics and gynaecology (O&G), cancer-related, dermatology, and paediatrics. The group has a total of 15 specialists as of 31 March 2019.
The group hired a fully-qualified O&G specialist, Dr Clara Ong, in May 2019. This should boost revenue for the O&G division, while a new paediatrician, Dr Petrina Wong, joined in February 2019. SOG is also exploring regional expansion by partnering through collaborations or joint ventures.
SOG provided a total return of 14.2% YTD, and its historical dividend yield stands at 4.4%.
Great growth prospects in the Asia-Pacific healthcare market
The healthcare industry provides great long-term growth prospects for investors. Frost and Sullivan, an independent research firm, estimates that the Asia-Pacific healthcare market will expand by 7.2% to US$486 billion this year. Singapore’s government also estimates that healthcare spending will increase to almost 3% of GDP from the current 2.2% due to a rapidly aging population and the government offering more health subsidies.
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 Singapore Exchange Limited and Singapore O&G Limited. Motley Fool Singapore contributor Royston Yang owns shares in Singapore Exchange Limited.