Raffles Medical Group *Official* (SGX: BSL)

MikeL09

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Raffles Medical Group is trading at 28 times the earnings, and more than 4 times the book value and I think the dividend also not so attractive (at least SH got better dividends for the valuation). Me thinks there are better options out there.

Yes, with ageing population comes increased healthcare cost but whether a company can take advantage is another question. There is always a right sector and a right company within the sector at the right price. The stars must align woh.

I will never buy at the current price. It is ridiculous!:s22:
Even assuming they can capitalise on the China market, it will take time for fruits to bear.
 

koxinga

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I will never buy at the current price. It is ridiculous!:s22:
Even assuming they can capitalise on the China market, it will take time for fruits to bear.

I agree. No offense, but many companies say go China, big potential, but backside got burn. I worked in China before, and I think it is not so easy. For medical, I see a lot of private hospitals there, even in Tier 2 cities. Parkway limited themselves mostly to Shanghai for now if I am not wrong. So I think competition pretty fierce.

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If want medical exposure, I would go for Parkway REIT. Lower PTB, higher yield, got FCF and overall cheaper price to enter. (not a buy or sell call, not vested)
 
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MikeDirnt78

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1) Valuation of Plife is not comparable to RMG. The former is a reit while the latter is a growing company. Both have different business structures. By the way, Plife has a rich valuation too if you compare among all the reits. ie It has the lowest yield and highest PTB among the reits.

2) Acording to Shareinvestors, RMG has a rolling PE of 28.3. Compared to Medical & Biotechnology of 30.1 and FTSE ST Health Care Index of 25.1. So I dont think RMG is that "expensive" in terms of PE. In terms of PTB, then its a bit subjective to compare. The PTB is high compared to other stocks of the same sectors.

3) Dividends wise, RMG has traditionally given little throughout the years but they have grown at a CAGR of 12.5% pa in the past 5 years. So one shouldnt be looking at the dividends as source of returns.
 

koxinga

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I guess we got different strategy and approach. The sectoral PE which you provided only serves to tell me that the entire Healthcare sector maybe overpriced in my definition. It sounds silly but I am not interested in any company with a PE of more than 15. By that definition, I am perfectly happy with slow CGAR and regular dividend payout rather than high CGAR and no dividends.

Ideally, I would like to have CGAR and dividends but that is a bit rare nowadays.:s13:
 

windwaver

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Raffles Medical Group is trading at 28 times the earnings, and more than 4 times the book value and I think the dividend also not so attractive (at least SH got better dividends for the valuation). Me thinks there are better options out there.

That's it. P/B and P/E doesn't look good and dividend not attractive; many better options.
 

Carnage

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I guess we got different strategy and approach. The sectoral PE which you provided only serves to tell me that the entire Healthcare sector maybe overpriced in my definition. It sounds silly but I am not interested in any company with a PE of more than 15. By that definition, I am perfectly happy with slow CGAR and regular dividend payout rather than high CGAR and no dividends.

Ideally, I would like to have CGAR and dividends but that is a bit rare nowadays.:s13:

PE is but a gauge. Don't get too fixated on it.

Side note: you're comparing PE and dividend yield across sectors. That's wrong. You should compare within the same sector to have a proper valuation.
 

MikeDirnt78

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as a long term shareholder, i dont mind the direction in the short term. my position in RMG is not that large yet. im willing to accumulate if there is any price correction. i am happy if RMG goes up too. :D
 

Some-one

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I guess we got different strategy and approach. The sectoral PE which you provided only serves to tell me that the entire Healthcare sector maybe overpriced in my definition. It sounds silly but I am not interested in any company with a PE of more than 15. By that definition, I am perfectly happy with slow CGAR and regular dividend payout rather than high CGAR and no dividends.

Ideally, I would like to have CGAR and dividends but that is a bit rare nowadays.:s13:
For a growth stock, PE is not a good gauge. Most growth stocks' PE is above 20, coupled by low dividend payout ratio. Plife REIT is suitable for those who wants constant dividends. I use both growth and dividends stock to prop up my portfolio. To me, I see RMG as a growth stock and I don't mind betting all my estate on it if there is a correction... :)

As for China, yes, there are a number of hospitals in China but importantly, the patients that RMG is trying to cater to is different. Besides, Singapore is well known in the medical fraternity. Considering that China would become richer by the day, would rich chinese risks their health and choose a lower grade hospital when they are ill or when they need surgeries?

A person once told me about the public hospital in Singapore competing with RMG and so he is bearish on it. I bet that he does not understand that RMG is catering to a different group of people. Our public hospitals are not a direct competitor to RMG.
 

koxinga

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I use PE as one of the gauges and 15 as it is the median for S&P 500. (e.g there are earnings approach, asset based approach and cashflow approaches to valuation) I will also look at sectoral PE across the board if I find something interesting about their business case.

I prefer to err on the side of safety. Ideally, I hope to accumulate companies like Boustead that has a nice CGAR as well as a good dividend policy but other than outright winners, I would prefer to wait it out and hold some boring stocks like CM Pacific and NSL. But then again, if Boustead hits around $2.5, I would consider exiting especially if it runs up too fast without the numbers justifying the valuation (based on earning of 0.17)


If RMG corrects to an attractive level, I might consider entering. Been looking at healthcare for a while hence my comments to OP. I have just one REIT, maybe it is just me but I dun really like REITS in general; other than FEHT which I got at IPO, many years ago, I had Ascendas when it IPO and sold it after a year.
 

Carnage

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I use PE as one of the gauges and 15 as it is the median for S&P 500. (e.g there are earnings approach, asset based approach and cashflow approaches to valuation) I will also look at sectoral PE across the board if I find something interesting about their business case.

I prefer to err on the side of safety. Ideally, I hope to accumulate companies like Boustead that has a nice CGAR as well as a good dividend policy but other than outright winners, I would prefer to wait it out and hold some boring stocks like CM Pacific and NSL. But then again, if Boustead hits around $2.5, I would consider exiting especially if it runs up too fast without the numbers justifying the valuation (based on earning of 0.17)


If RMG corrects to an attractive level, I might consider entering. Been looking at healthcare for a while hence my comments to OP. I have just one REIT, maybe it is just me but I dun really like REITS in general; other than FEHT which I got at IPO, many years ago, I had Ascendas when it IPO and sold it after a year.

You talk about using average PE of S&P 500, so do you know what is the PE for the health sector?
 

koxinga

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You talk about using average PE of S&P 500, so do you know what is the PE for the health sector?

http://www.msci.com/resources/factsheets/index_fact_sheet/msci-world-health-care-index-usd-gross.pdf

Yup, I know what you are driving at. But I think the current sectoral PE is still high in my point of view. We can agree to disagree on this.

PE is simply a reflection of what people are willing to pay; if everyone is willing to pay that price (e.g the relative PE), it does not mean I am willing to mah.

My friend, who visited used car dealers asked one of them, why he is selling a particular brand/model/age of car at a price which is 10K above the paper value if scrapped. The dealer replied that it was "market price" (sector PE) which all the dealers are selling at and had closed at. If a dealer was able to sell you at 6k above paper instead of 10k, do you feel you are getting a 4k discount?
 
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Carnage

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http://www.msci.com/resources/factsheets/index_fact_sheet/msci-world-health-care-index-usd-gross.pdf

Yup, I know what you are driving at. But I think the current sectoral PE is still high in my point of view. We can agree to disagree on this.

PE is simply a reflection of what people are willing to pay; if everyone is willing to pay that price (e.g the relative PE), it does not mean I am willing to mah.

My friend, who visited used car dealers asked one of them, why he is selling a particular brand/model/age of car at a price which is 10K above the paper value if scrapped. The dealer replied that it was "market price" (sector PE) which all the dealers are selling at and had closed at. If a dealer was able to sell you at 6k above paper instead of 10k, do you feel you are getting a 4k discount?
Not disagreeing with you on anything.

I just think that you are comparing in a un-analytical manner. One shouldn't compare a single company's ratios to a broad index ratio. Sector indices are fair game. If the health sector has always been above 20x PE, who's to say that companies priced below that price is overvalued? Unless you're implying the whole sector is overvalued...

Then again, you compared RMG with a REIT.
 

koxinga

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Not disagreeing with you on anything.

I just think that you are comparing in a un-analytical manner. One shouldn't compare a single company's ratios to a broad index ratio. Sector indices are fair game. If the health sector has always been above 20x PE, who's to say that companies priced below that price is overvalued? Unless you're implying the whole sector is overvalued...

Then again, you compared RMG with a REIT.

That's my point. (see underline). yes, you might ask why I think so. it is my un-analytical way of thinking.

Re comparing with REIT

I know the structure is different, but I look at it from an asset class and sector point of view. You want to invest in property, you can:
1) buy a physical house,
2) buy capland, kepland etc
3) buy a property based REIT

different considerations and risk levels, yet facing the same macro-economic consideration.
 

koxinga

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Anyway, sectoral P/E ratios give you a finer granularity, broad ratios such as a market index give you a coarser view right?

I choose to use a coarser view at the expense of losing out and limiting my upside potential. (e.g healthcare sector's PE is higher than the market PE).
 

Dividends Warrior

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Let's take a look at the PE of healthcare stocks in Singapore.

- IHH (82.1)
- RMG (35.4)
- Q&M Dental (32)
- International Healthway (12)

The super expensive one is IHH? :s11:
 

MikeDirnt78

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When IHH was listed, i remember its PE was 50+ if i am not wrong. I bought RMG at $2.30+ because RMG was trading at a much lower PE. IHH and RMG are the most closest comparable since TMG was delisted at that time.

Since there was a mismatch in valuation, i know IHH share price has to come down or RMG has to go up. In the end, both went up. :s13:

There must be a reason why the healthcare sector is commanding a much higher PE in Asia. The demand and growth must be there to support the higher valuation in these medical stocks. So far the results of RMG has proven its steady growth.
 

chopra

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Let's take a look at the PE of healthcare stocks in Singapore.

- IHH (82.1)
- RMG (35.4)
- Q&M Dental (32)
- International Healthway (12)

The super expensive one is IHH? :s11:

dw, i just realised dbs vickers provides a very neat way to revealing all these fundamental ratios. u took the numbers from there as well or ownself calculate?

Anyway, lets not compare hospital with clinic.
but ihh @ p/e 82..... :eek: :eek:
 

Dividends Warrior

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dw, i just realised dbs vickers provides a very neat way to revealing all these fundamental ratios. u took the numbers from there as well or ownself calculate?

Anyway, lets not compare hospital with clinic.
but ihh @ p/e 82..... :eek: :eek:

I took the figures from sharejunction. I also remembered IHH having high PE bcos I used to be vested before.

I understand Mount Elizabeth and Gleneagles Hospital are super elite private hospitals, but 82 times is really......:s22:

I guess u r right. Cannot compare hospitals with clinics.
 

Carnage

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That's my point. (see underline). yes, you might ask why I think so. it is my un-analytical way of thinking.

Re comparing with REIT

I know the structure is different, but I look at it from an asset class and sector point of view. You want to invest in property, you can:
1) buy a physical house,
2) buy capland, kepland etc
3) buy a property based REIT

different considerations and risk levels, yet facing the same macro-economic consideration.
Correct, but do you know why alot of ppl is saying the sector may not be as what you described?

Hint: it's got something to do with historical valuations.

By the way, buying a physical house or real asset vs. buying a developer vs. buying a REIT is most definitely NOT the same. The difference is so fundamental and obvious.
 
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