Are These Healthcare Stocks In "Good Health"?: Raffles Medical, Thomson Medical, And Q&M Dental
 
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Are These Healthcare Stocks In "Good Health"?: Raffles Medical, Thomson Medical, And Q&M Dental

Isaac Chan
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A few weeks ago, my sister got admitted to medical school at an Australian university.

I’m really happy for her as it is notoriously difficult to study medicine and dentistry in Singapore – due to the intense demand here to major in either field. It’s a good measure of how essential healthcare is to the country and her future is pretty much set because she’ll be in a highly sought after industry that pays well.

This got me thinking about perhaps investing in Singapore’s healthcare stocks to safeguard my future. And when it comes to healthcare, three of the biggest names in the industry came to mind: Raffles Medical Group (SGX: BSL), Thomson Medical (SGX: A50), and Q&M Dental Group (SGX: QC7).

Business Model

Before diving into the comparison, it will be good to understand their respective business models.

  1. Raffles Medical Group (SGX: BSL)

    Raffles Medical Group Staff And Building Facade
    Source: Raffles Medical Group | Facebook

Raffles Medical is one of the most famous healthcare brands in Singapore, and some might say it is a more “atas” provider of healthcare.

Apart from being a private healthcare provider in Singapore, they also operate medical facilities in 12 other cities which include Cambodia, China, Japan, and Vietnam. They also own Raffles Hospital, a tertiary care hospital in Singapore that is extremely well-known too.

      2. Thomson Medical Group Limited (SGX: A50)

Thomson Hospital Exterior
Source: Thomson Medical Group

Thomson Medical is another more “atas” healthcare company in Singapore. The group’s business includes TMC Life Sciences Berhad as well as Thomson Medical Pte Ltd.

The business was started in 1979 and the company is known for its focus in Obstetrics & Gynaecology and Paediatrics with 35 specialist clinics in Singapore.

      3. Q&M Dental Group (SGX: QC7)

Q&M Dental Centre Reception Counter
Source: Expat Living Singapore

Q&M Dental is a brand which probably needs little explaining too, as most of us would be familiar with their dental outlets across Singapore.

They were first established in 1996 and have grown very quickly over the last few years. Currently, the group has more than 70 outlets in Singapore and 14 dental outlets in Malaysia, and one in China. They have also received quite a number of awards over the years.

Revenue and Profitability

 Raffles Medical Thomson MedicalQ&M Dental
FYE 31.12.18FYE 31.12.18FYE 31.12.18
Revenue ($'millions)489216120
EBITDA Margin21.0%24.0%17.3%
Operating Profit Margin17.2%17.3%14.5%
Net Profit Margin14.5%6.8%11.8%

Some Definitions

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. This just means earnings without these associated costs.

Operating Profit refers to EBIT or Earnings Before Interests and Taxes. Net Profit refers to revenue minus all sorts of costs.

Comparisons

From the table, it is clear that Raffles Medical generates the most amount of revenue, and has one of the best profitability margins. Q&M is probably the next most profitable, as it has a much higher net profit margin than Thomson Medical, despite smaller revenues.

To get an in-depth analysis of Raffles Medical Group, click here.

Seedly Q&A Raffles Medical Group (SGX: BSL)

Balance Sheet Strength

 Raffles Medical Thomson MedicalQ&M Dental
FYE 31.12.18FYE 31.12.18FYE 31.12.18
Current Ratio1.071.413.51
Debt / Current Assets0.591.151.55
Debt / EBITDA1.1411.193.82
Interest Coverage Ratio71.112.056.60

Some Definitions

The current ratio is a figure used to represent short-term liquidity, which is just how well a business can fulfil their short-term financial obligations.

The higher the ratio, the better.

Debt/Current Assets is a measure of how much debt there is relative to a company’s short-term assets. Typically, the lower the ratio, the better position the company should be in when paying off debt.

Debt/EBITDA measures how much debt is there relative to earnings. The lower the ratio, the better.

Interest Coverage Ratio, on the other hand, represents how much earnings there is relative to interests payments. Again, the lower the ratio the better.

Comparisons

When it comes to short-term liquidity, it seems that Q&M is the best based on their current ratio, followed by Thomson Medical and Raffles Medical.

To find out if Q&M Dental Group shares could be a good buy, click here.

Seedly Q&A Raffles Medical Group (SGX: BSL)

For debt and interest costs profile, Raffles Medical seems to be the best, followed by Q&M and Thomson Medical. This is because relative to their earnings, Thomson Medical has a large amount of debt which requires servicing.

Valuation

 Raffles MedicalThomson MedicalQ&M Dental
Market Cap1.85B1.72B369M
P/E Ratio26.82X86.67X28.35X
P/B Ratio2.24X2.30X3.32X
P/S Ratio3.67X3.60X3.09X

Some Definitions

Market Cap refers to the market value of a listed company’s outstanding shares.

It is calculated by taking the total number of shares outstanding multiplied by the share price. This is a common metric used to determine the size of a company.

P/E, P/B, and P/S ratios are all different metrics used to value a company. These ratios represent how much you are willing to pay through the purchase of shares for a certain portion of a company’s performance.

The P/E ratio represents how much you are willing to pay for every one dollar of the company’s earnings.  For the P/B ratio, it represents the price for every $1 of a company’s book value per share. Lastly, the P/S ratio represents the price of every $1 of revenue per share.

The higher these ratios are, the more “expensive” the stock is.

Comparisons

From the table, we can see that Raffles Medical has the largest market capitalisation, followed by Thomson Medical and Q&M. In fact, Q&M is much smaller than the other two companies based on market cap.

Thomson Medical’s shares seem to be the most expensive, based on a very high P/E ratio of almost 90X, which is more than three times that of Raffles Medical and Q&M. Between Raffles Medical and Q&M share, it is harder to see which shares are the most expensive.

To perhaps understand why Thomson Medical Group Limited‘s shares are so expensive, click here.

Seedly Q&A Raffles Medical Group (SGX: BSL)

Additionally, Thomson Medical’s P/E ratio is very outstanding compared to the P/E ratios of the other two firms. However, the P/B and P/S ratios of the firms seem to trade in much more similar ranges. This could be reflective of how companies in the same industry usually have similar P/E, P/B and P/S ratios.

We can also see that Raffles Medical and Thomson Medical’s shares trade at more similar P/B and P/S ratios than Q&M’s ratios. This could be because Raffles Medical and Thomson Medical share more similar characteristics than with Q&M.

Closing Thoughts

In summary:

  • Raffles Medical has the best revenue and profitability
  • There’s no clear winner in terms of balance sheet strength, but Thomson Medical has taken on a lot more debt relative to earnings
  • Thomson Medical shares are the most expensive based on their P/E ratio

So… Which Stock Should I Invest In?

I believe my analysis so far might not be sufficient for such a decision.

If you’re interested, I have given a much more in-depth analysis of each of these three stocks on the Seedly Q&A platform:

Raffles Medical Group (SGX: BSL)

Seedly Q&A Stocks Discussion: Raffles Medical Group (SGX: BSL), Thomson Medical Group (SGX: A50), Q&M Dental Group (SGX: QC7)

Thomson Medical Group (SGX: A50)

Seedly Q&A Raffles Medical Group (SGX: BSL)

Q&M Dental Group (SGX: QC7)

Seedly Q&A Raffles Medical Group (SGX: BSL)

Which healthcare stock would you pick and why? Share with us in the comments below!

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About Isaac Chan
An aspiring quant (with a background in Finance) who is comfortable with numbers, loves obscure investment strategies and speaks Disney fluently.
You can contribute your thoughts like Isaac Chan here.

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