Healthcare sector in Asia seen as resilient
Healthcare stocks have emerged as the best-performing sector on the Singapore bourse in the otherwise bearish market, with investors attracted by their diversity, stability and growth prospects.
And with active plans to expand into new markets and businesses, companies such as Q&M Dental Group and Singapore O&G still have plenty of upside to offer.
Singapore Exchange's (SGX's) healthcare index - comprising 29 stocks worth about $30 billion in market value in total - had recorded a 5.3 per cent rise in total return (the price gain plus dividend) so far this year as at the end of last month.
"That's compared with Straits Times Index's total return of negative 14.6 per cent in the same period. It has also performed better than the MSCI Asia Pacific ex-Japan healthcare index, which grew 3.9 per cent in total return in Singapore-dollar terms," SGX market strategy director Geoff Howie told The Straits Times last week during the Healthcare Corporate Day investor event.
"What's interesting is that this standout growth actually came after a 12 per cent drop in the third quarter due to the broader market decline. But healthcare is still the strongest among SGX's top-10 sectors, even though, by market value, it is only around 3 per cent of the total market."
Asian plays in healthcare, regarded as a resilient sector, are favoured by investors for their growing exposure to the region's modernisation, booming populations, rising affluence and recession-proof demand for their services and products. Reflecting the strong interest, up to seven healthcare counters were among the top 100 most active stocks in the third quarter. These included popular picks such as Parkway Life Real Estate Investment Trust (Reit), Raffles Medical Group and Q&M.
Mainboard-listed Q&M has been particularly eye-catching, delivering 75.3 per cent total return growth - the highest in the sector - in the first nine months of this year. It closed 0.5 cent lower at 70.5 cents last Friday.
Its revenue has been growing at an annual rate of 27 per cent to about $100 million in 2014, and the first half-year revenue already hit $60 million after a series of acquisitions and joint venture deals, chief operating officer Raymond Ang said.
"With 71 dental outlets in Singapore, we already have a stable income-generating platform. Now, on top of this platform, we are also growing in new markets such as China, where we have a 60 per cent joint venture that operates three dental hospitals in Shenyang."
More growth plans are on the cards, Dr Ang added, as Q&M is exploring the listing of its hospital assets in China. Back in Singapore, the group has also completed the acquisition of TP Dental Surgeons last month to enter the premium market.
Steady growth and ambitious expansion are common among Singapore's healthcare firms while other sectors languish in an economic slowdown.
Just last month, Raffles Medical Group announced that it will open its first medical centre in Japan, and the group has recently acquired a chain of 10 clinics in China, Vietnam and Cambodia. Raffles' shares have risen about 14.2 per cent in the past 12 months, closing at $4.42 last Friday.
Singapore O&G has also attracted plenty of investor attention. Since its Catalist debut in June, the obstetrics-gynaecology specialist clinic group's stock has surged about 160 per cent to close at 66 cents last Friday.
O&G is gaining market share and will look to expand into new disciplines, chief executive Victor Ng noted.
"In terms of baby delivery in Singapore, our market share has grown from 5.6 per cent last year to 6.4 per cent in the first half this year.
"To complement our business, the natural next step will be to venture into paediatrics, which I think can happen in the first half next year. We are also in initial talks to set up venture companies in China, Vietnam and Myanmar," Dr Ng said, adding that O&G will not shun opportunities to explore hospital -related businesses.
As the sector thrives, it will also further diversify, SGX head of sales and clients Chew Sutat said, noting that more regional healthcare assets will look to Singapore's vibrant Reit or business trust market to raise funds.
Correction: The report stated that Singapore O&G chief executive Victor Ng said the company will not shun opportunities to enter hospital operations. That is inaccurate. Mr Ng meant that O&G would not shun opportunities to explore hospital-related businesses. We are sorry for the error.