Singapore Healthcare Monthly - Phillip Securities 2019-01-22: Public Healthcare Still In The Lead

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HEALTH MANAGEMENT INTL LTD (SGX:588) Q & M DENTAL GROUP (S) LIMITED (SGX:QC7) RAFFLES MEDICAL GROUP LTD (SGX:BSL) SINGAPORE O&G LTD. (SGX:1D8)

Singapore Healthcare Monthly - Public Healthcare Still In The Lead

• Singapore’s hospital admissions grew 4.3% y-o-y in Nov’18 with the public sector taking a larger share.
• Singapore’s birth rate fell 4.9% y-o-y in Sep’18, the fourth month of contraction.
• The number of Singapore citizens aged 65 and over grew 6.0% y-o-y in 2018, unchanged from 6.0% y-o-y in 2017.
• Malaysia’s B40 Health Protection Fund scheme will provide insurance protection for the bottom 40% of the population.
• Maintain NEUTRAL for the Singapore Healthcare Sector.

Singapore

Singapore’s hospital admissions grew 4.3% y-o-y in November

• November’s hospital admissions for the public sector grew at a faster of 5.6% y-o-y while private sector’s admission growth was flat at 0.1% y-o-y. Singaporeans are shifting from private to public healthcare service as well as having a higher preference for outpatient care as compared to inpatient care.
• Competition from the new and upcoming public hospitals in the next five years include the Sengkang General and Community Hospital, Outram Community Hospital, Integrated Care Hub, and Woodlands General Hospital will be an addition of 3,200 acute hospital beds and 1,050 community hospital beds.

Number of doctors in Singapore grew 3.2% y-o-y in 2017

• Between 2008- 2017, the number of doctors in Singapore grew at a CAGR of 6.1%, bringing the number of doctors per 10,000 people to 24 in 2017 as compared to 16 in 2008.
• The number of dentists per 10,000 people remained relatively flat at 4 in 2017 as compared to 3 in 2008.

Singapore’s medical tourism enveloped in headwinds

• Singapore continues to face greater competition from increased medical capabilities in regional rivals such as Malaysia and Indonesia, coupled with rising costs (in accommodation and transport) and a strengthening SGD.
• Medical tourism in Singapore is turning less affordable and less attractive to foreign patients. Numerous healthcare companies are now expanding overseas such as RAFFLES MEDICAL GROUP LTD (SGX:BSL)’s upcoming hospital in Chongqing. Gestation costs could mute earnings growth initially, but a well-executed overseas expansion is likely to bring meaningful upside to earnings growth in the longer-term.

Malaysia

B40 Health Protection Fund (B40HPF)

• Malaysia’s Budget 2019 announced the B40HPF (effective 1 January 2019), piloted by the Federal Government in partnership with the private insurance industry to provide insurance protection for the bottom 40% of the population; covering
  1. 36 major critical illnesses,
  2. up to 14 days of hospitalisation income at RM50/day or RM700 per annum.
• The scheme will be managed by Bank Negara Malaysia (BNM).
• Previously, the private healthcare sector in Malaysia was primarily utilised by the upper-middle to affluent portion of the population. With the introduction of B40HPF to target the bottom 40% of Malaysia’s population, we believe the scheme will benefit the private healthcare companies by directing a higher flow of patient load to the private healthcare sector, albeit at a discounted rate.

INVESTMENT ACTIONS

We maintain a NEUTRAL on the Singapore healthcare sector due to near-term headwinds.

• To regain its competitive advantage, the Singapore private healthcare sector would have to focus on speciality treatments, eliminate pricing surprises, and tap on overseas expansions, and mergers and acquisitions. However, the high standards of medical service quality, stringent healthcare regulations and increasing regional diversification should help the Healthcare sector to ride out these near-term headwinds.

RAFFLES MEDICAL GROUP LTD (SGX:BSL)

• Rating: ACCUMULATE (Maintained)
• Forecast Dividend: SGD 0.02
• Target Price: SGD 1.16

HEALTH MANAGEMENT INTL LTD (SGX:588)

• Rating: BUY (Maintained)
• Forecast Dividend: SGD 0.005
• Target Price: SGD 0.770

Q & M DENTAL GROUP (S) LIMITED (SGX:QC7)

• Rating: NEUTRAL (Maintained)
• Forecast Dividend: SGD 0.012
• Target Price: SGD 0.513

SINGAPORE O&G LTD. (SGX:1D8)

• Rating: BUY (Maintained)
• Forecast Dividend: SGD 0.016
• Target Price: SGD 0.420

Tin Min Ying Phillip Securities Research | https://www.stocksbnb.com/ 2019-01-22

SGX Stock Analyst Report BUY MAINTAIN BUY 0.770 SAME 0.770

NEUTRAL MAINTAIN NEUTRAL 0.510 SAME 0.510

ACCUMULATE MAINTAIN ACCUMULATE 1.160 SAME 1.160

BUY MAINTAIN BUY 0.420 SAME 0.420