2 Reasons to Invest in Healthcare Stocks June 12, 2017
Ever thought of healthcare as an investment? Healthcare stocks can form an integral part of one’s portfolio for its
1) resilient earnings; and
2) potential organic earnings growth due to healthcare cost inflation. In Singapore, there are 2 fundamental trends that define the upside of the healthcare industry.
1) Aging Population and Longer Life Expectancy
During 2005, population in Singapore that are aged 65 and above was 270,000. That number has close to double to 440,000 in 2015 and is expected to reach 900,000 by 2030. With the advancement of medical technologies, life expectancy of Singapore citizens has also increased to 82.9 years based on the latest numbers provided by Singstat. Furthermore, statistical studies by Ministry of Health have also shown that the number of hospital admission increases with age.
2) Higher Earning Power
According to the numbers provided by the Ministry of Manpower, the median gross monthly income for Singapore residents has grown consistently over the years. With increasing income and insurance policies covering private hospitalisation expenses, those seeking medical attention may likely turn to private sources for more personalised services and shorter waiting time.
Source: http://stats.mom.gov.sg
In addition, Singapore is ranked as the 4th healthiest country based on the 2017 Bloomberg Global Health Index. Apart from local spending, this is a pull factor for wealthy individuals around the Asian region to choose Singapore as a potential medical destination.
Over the past 5 years, the SGX All Healthcare Index grew at an average of 10.8% from 922.87 (14 June 2012) to 1,423.13 (12 June 2017). SGX All Healthcare index tracks the performance of healthcare equipment, healthcare supplies, healthcare distributors, healthcare services, healthcare facilities, pharmaceuticals, office services & supplies, and healthcare REITs.
The following are examples of healthcare companies or investment trusts that are traded on the Singapore Stock Exchange.
| Name | Sector | Dividend Yield | Price to Earning |
| Raffles Medical Group | Integrated Healthcare Provider | 1.46% | 34.3 |
| HMI | Hospitals | 0.33% | 91.3 |
| Talk Med | Specialised Services (Medical oncology, Stem Cell Transplant) | 2.81% | 28.5 |
| Singapore Medical Group | Specialised Services (Ophthalmological, Orthopedic, Oncology, Gynecological and others) | – | 80.9 |
| UG Healthcare | Healthcare Glove Manufacturer | 2.40% | 16.1 |
Source: SGX stockfacts, based on 9th June 2017
| Name | Exposure | Dividend Yield | Price to Earning | Price to Book |
| ParkwayLife REIT | Singapore, Japan | 4.72% | 17.126 | 1.533 |
| First REIT | Indonesia | 6.44% | 23.765 | 1.218 |
Source: SGX stockfacts, based on 9th June 2017
Valuing a growth stock is never easy. Healthcare stocks are generally priced at a premium with low dividend yield. While medical tourism in Singapore is facing stiff competition from its neigbours, investors should look at the overall strategies like product mix or expansion into overseas markets when evaluating investment opportunities.
If you wish to know more information about stocks, you can speak to your designated Trading Representatives or a Dealer at a Phillip Investor Centre near you.
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About the author
Mr Michael Tay
Equity Dealer
Mr. Michael Tay currently provides dealing services to over 17,000 trading accounts and is part of the POEMS Dealing, the core in-house dealing department of Phillip Securities Pte Ltd. Michael is a strong believer of value investing, focusing on companies with strong fundamentals and good dividend policy. Apart from his dealing role, he often provides training seminars on Fundamental Analysis topics to further enrich his clients’ financial knowledge. Michael holds a Bachelor Degree of Finance from the SIM University (UniSIM) and was awarded the CFA Singapore Silver Award in 2012.
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