Yahoo Finance This Singapore Healthcare Stock Has Grown its Dividends and Profits Since 2020: Can it Continue to Do So?
Healthcare is a hot-button issue for the Singapore government.
During this year’s Budget 2023, Finance Minister Lawrence Wong highlighted that Singapore is one of the fastest-ageing nations in the world.
By 2030, just seven years from now, one in four Singaporeans will be aged 65 and above.
Hence, the Ministry of Finance will top up the Eldercare Fund by S$500 million, MediFund by S$1.5 billion, and boost the ComCare Fund by S$300 million.
The government’s keen focus on healthcare puts Raffles Medical Group (SGX: BSL), or RMG, in the spotlight.
The integrated healthcare player played a pivotal role during the pandemic, helping to administer vaccinations and carry out PCR tests, as well as treating COVID-19 patients at its community treatment facilities.
Can RMG continue to do well as Singapore transitions to the endemic phase of the pandemic?
An impressive financial performance
By helping the government out during the pandemic, RMG has managed to grow both its revenue and net profit from 2020 to 2022.
Group revenue rose 27.4% year on year to S$723.8 million in 2021 as COVID-19 initiatives boosted its healthcare services revenue by 63.1% year on year.
Net profit for that year grew 27.7% year on year to S$84.2 million.
The group also raised its annual dividend from S$0.025 to S$0.028 in line with the good results.
The integrated healthcare player managed to repeat this feat in 2022 as it reported a 5.9% year-on-year rise in revenue to S$766.5 million and a 70.5% year-on-year surge in net profit to S$143.5 million.
RMG once again raised its dividend, this time by 35.7% year on year to S$0.038.
With a sharp decline in PCR tests, investors may be wondering if the group can keep up this momentum.
Is RMG able to continue increasing its revenue, profits, and dividends?
A transformation of the healthcare system
Despite the fall in COVID-19 vaccinations and tests, RMG should still benefit from the catalyst triggered by Singapore’s ageing population.
With a larger proportion of older people, more will seek medical attention and require healthcare services.
The statistics are sobering.
Older people are four times more likely to be hospitalised and they also stay three times longer than younger adults.
Health Minister Ong Ye Kung has highlighted Singapore’s “super-aged” status by 2026, noting that this social trend will dominate policy for many years to come.
A super-aged society is one where 21% of the population is aged 65 and above, as defined by the United Nations.
As a result, the country is embarking on the Healthier SG initiative this month, where individuals are encouraged to work with a general practitioner (GP) to take charge of their health.
A transformation of the healthcare system is also in the works, with better digitalisation and data sharing by different parts of the health ecosystem.
GPs will be given incentives to spend more time on preventative care and chronic disease management and will be partnered with one of three public healthcare clusters.
This news bodes well for RMG’s business as it will work with the government to achieve these outcomes and have access to a wider pool of potential patients.
Transitional care facilities
Meanwhile, RMG’s transitional care facilities (TCFs) will continue to aid the Singapore government in assisting overwhelmed public hospitals that face a bed crunch.
These TCFs were set up by the group during the pandemic to help to ease the pressure off the public healthcare system over worries that severe COVID-19 cases may mount.
There will be an upcoming TCF tender in the west that looks set to boost RMG’s financials should it clinch the contract.
Catalysts for China
Elsewhere, China has also reopened its economy and borders and shed its strict COVID-19 policy earlier this year.
Local and expatriate patients can now return to seek treatment at the group’s hospitals in Chongqing, Shanghai, and Beijing.
These three hospitals had supported government-led COVID-19 initiatives during the pandemic and would have built up a following as being reliable and having the capabilities to tackle a wide range of medical issues.
Back in August last year, RMG also received approval to set up an in-vitro fertilisation and assisted reproductive therapy centre in Hainan.
This facility will complement its three hospitals and targets to serve around 40 million women in China who require reproductive fertility services.
RMG should enjoy an additional revenue stream from this facility as China abandoned its long-standing one-child policy back in 2016 and introduced a three-child policy in 2021.
Get Smart: Healthy tailwinds for the business
It appears that RMG has more than a few tailwinds that promise to boost its business in the near term.
With more patients flowing back to its hospitals and medical clinics, along with Singapore’s healthcare initiatives, it looks likely that the group can continue to increase its top and bottom lines.
And should net profit increase, there is a high chance that dividends will also follow.
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Disclosure: Royston Yang owns shares of Raffles Medical Group.
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