Over the last five years, Raffles Medical Group Ltd (SGX: BSL) shares have tumbled 28% and now trade close to a five-year low. However, that is not to say that the healthcare giant has not been a massive winner over the longer term. Since it was listed in Singapore in 2000, the healthcare provider has grown at a breakneck pace, becoming one of Singapore’s most recognisable healthcare brands.
I took a trip down memory lane to see how much an investor would have made if they had invested in Raffles Medical around 20 years ago.
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In 2000, shares of Raffles Medical traded at a split-adjusted price of 23.5 Singapore cents per share. Today, Raffles Medical shares exchange hands for around 96.5 Singapore cents. That equates to a 310.6% gain in that time frame. For perspective, $1,000 invested at that time would now be worth S$4,106.
Doing the math, that translates to a decent annualised growth of 7.3%. On top of that, Raffles Medical has been a regular payer of dividends. Last year, Raffles Medical paid out a dividend of 2.5 Singapore cents per share. Based on an initial outlay of 23.5 Singapore cents per share in 2000, that would translate into a juicy 10.6% annual yield on the initial investment.
Not a smooth ride
However, the returns of the stock were by no means smooth. From 2000 to 2008, its shares rose by almost 100%. Unfortunately, the great financial crisis of 2008 scared off many investors who began selling down the stock, which soon returned to its 2000 level.
But Raffles Medical in 2009 was in a much better position than it was in 2000. Its 2009 revenue was three times more than it was in 2000, while its profit was more than seven times higher.
Unsurprisingly, the dip in its share price then was short-lived. Its shares soon started regaining all that it had lost in 2008 and more.
There are a few lessons that can be learnt from Raffles Medical’s twenty-year history.
- Never underestimate the power of long-term investing. Despite the volatility, investors who were patient enough to hold on to its shares for the whole 20 years have been well-rewarded.
- Do not panic during a broad market sell-off. As seen in 2008, even fundamentally sound companies suffered major sell-downs. As investors, it is easy to panic and push the sell button at the first sign of trouble. However, investors who did sell would have not enjoyed the massive gains that Raffles Medical has afforded loyal shareholders.
Today, Raffles Medical shares have again suffered a massive sell-down. It currently trades at around 30.6 times its annualised earnings. At a glance, this may not seem excessively cheap. However, there are a few things to note.
First, Raffles Medical Group earnings have been dragged down due to near-term teething losses from the opening of its first hospital in China. Second, despite the risks involved, the new China hospitals could potentially be a huge driver of profits over the longer term. Co-founder and chairman, Dr. Loo Choon Yong, is hopeful that China will contribute more than 50% of the group’s revenue in the future.
As such, its shares could see a massive boost once its China hospitals start turning profitable. If the past is anything to go by and considering the healthcare provider’s massive potential in China, I think it is likely that patient investors who pick up shares today will be well-rewarded in the next 20 years.
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 Raffles Medical Group Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares in Raffles Medical Group Ltd.