SINGAPORE MEDICAL GROUP LTD (SGX:5OT)
IHH HEALTHCARE BERHAD (SGX:Q0F)
RAFFLES MEDICAL GROUP LTD (SGX:BSL)
HEALTH MANAGEMENT INTL LTD (SGX:588)
Singapore Strategy 2019 ~ Healthcare Sector - Not In The Pinkest Of Health
- Maintain NEUTRAL on the healthcare sector, with Singapore Medical Group as our Top Pick.
- Strong headwinds for the sector persist. Private healthcare players in Singapore continue to experience declining foreign patient loads, as competitors in neighbouring countries improve their standards and are more cost-competitive.
- The Singapore Government is also keeping tabs on rising healthcare costs, which may limit the ability for private healthcare players to raise prices.
Competition from foreign players.
- As healthcare costs in neighbouring countries like Malaysia and Thailand are much lower, they have been attracting medical tourists from the region – thereby eating into Singapore's market share. This is further exacerbated by the strengthening of SGD against regional currencies.
- On top of that, healthcare providers in these countries have also invested in better medical equipment and improved the quality of services over the years. Although there is no official data on the number of medical tourists, our channel checks with the companies under our coverage suggest that these numbers have been declining y-o-y. We believe this is a structural problem, and will continue to impact the Singapore players in the near term.
Government keeping tabs on rising healthcare costs, impacting margins.
- We think that some of the private healthcare providers’ margins will be negatively impacted, with the local government keeping tabs on rising healthcare costs, due to public discontent. In 2018, the Government published a guide of treatment fees, which will also deter private players from overcharging patients.
- In addition, healthcare insurance providers no longer offer integrated shield policies that cover 100% of medical costs. This could lead to lesser demand for private healthcare, as patients need to fork out at least a portion of the medical bills through cash.
Private hospitals are in a capex-intensive expansion phase.
- Most of the hospital players listed in Singapore including Raffles Medical (SGX:BSL), IHH Healthcare (SGX:Q0F) and Health Management International (SGX:588) are in an expansion phase. Margins are likely to face downward pressure as we expect start-up costs to eat into earnings in FY19. This is further exacerbated by a declining foreign patient load and soft demand from the domestic market.
NEUTRAL on the sector.
- We are not particularly excited about the sector, given the potential headwinds of declining foreign and local patient load and higher start-up expenses.
- Amongst the names under our coverage, Singapore Medical Group (SGX:5OT) is our preferred pick due to its compelling valuation compared to its peers. (see report: Singapore Medical Group - Focusing On Expanding Overseas Market | SGinvestors.io).
Juliana Cai CFA
RHB Securities Research
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Jarick Seet
RHB Invest
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Lee Seng Choon CFA
RHB Invest
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https://www.rhbinvest.com.sg/
2018-12-14
SGX Stock
Analyst Report
0.560
SAME
0.560
99998
SAME
99998
1.020
SAME
1.020
99998
SAME
99998
RHB Research | Singapore Strategy 2019 ~ Buy Selectively & Stay Defensive
2019 What To Expect & Market Valuation
2019 Singapore Stock Picks & Investment Themes
RHB Research | Singapore Strategy 2019 ~ Sector Outlook
Banks - NIM Widening To Drive Earnings
Consumer Sector - Favour Those Ready To Harvest
Healthcare Sector - Not In The Pinkest Of Health
Plantation Sector - Brace For Another Year Of Unexciting Prices
Real Estate Sector - Weighed Down By Measures And Rising Interest Rates
REITs - RHB Invest 2018-12-20: Selective Yield Plays Likely To Remain In Favour
Technology Sector - Trade War Uncertainty An Overhang On Tech Stocks
Telecommunication Sector - A Short-Term Reprieve?
Small & Mid-Caps - Pick Selectively From Bottom-up
