3 Top Singapore Healthcare Stocks to Buy Amid Volatility

March 17, 2023

Global healthcare stocks

The recent fallout of Silicon Valley Bank, the largest financial failure since the 2008 Global Financial Crisis (GFC), has led to a selloff in the financial sector and concerns on its impact to the global economy.

For investors who are scared of a global recession that might be coming, you should consider the Singapore healthcare sector.

The global healthcare sector has expanded rapidly over recent years, driven by significant medical advances, accelerated drug approval processes for high unmet needs as well as overall increased access to healthcare.

In Asia, the high quality of Singapore’s healthcare innovation has also attracted a global audience of investors.

During the first two months of 2023, half of the 10 stocks on the iEdge SG All Healthcare Index averaged a total return of 9.4%.

Both healthcare S-REITs, Parkway Life REIT (SGX: C2PU) and First REIT (SGX: AW9U), have reported 16.4% and 2.5% total returns, respectively, during the same period.

As noted in the recent financial releases, many of the healthcare-related companies are optimistic of their operational growth in 2023, with the return of international travel.

They believe that they are well-positioned to transition to the post-pandemic norm.

So, here are three Singapore healthcare stocks that investors can buy during this volatile market.

1. Parkway Life REIT

Parkway Life REIT (SGX: C2PU) is among the largest publicly traded healthcare Real Estate Investment Trusts (REITs) in Asia.

Its main focus is on investing in real estate properties and related assets that generate income, primarily in the healthcare and healthcare-related sectors.

As of December 31, 2022, Parkway Life REIT’s portfolio comprises 61 properties with an estimated total value of approximately S$2.20 billion.

During H2 FY2022 and FY2022, gross revenue increased by 14.2% year-on-year (yoy) to S$69.8 million and 7.7% yoy to S$130.0 million, respectively.

The growth can be attributed to higher rentals from the properties acquired in 2021 & 2022, adjusted revenue for Parkway East Hospital, and higher rents from the Singapore hospitals under the new master lease agreements.

This indicates that the REIT’s portfolio is expanding and generating greater revenue. The H2 FY2022 period was pretty much as expected by investors.

Given the current uncertain and volatile market, this is a positive development as the REIT remains disciplined and prudent while management continues to look to a multi-pronged growth platform for its next phase of growth.

This will focus on strengthening its presence in existing markets, building a third key market for mid- to long-term growth, and finally fostering multiple strategic partnerships that can help it grow and expand.

Parkway Life REIT has strengthened its presence in Japan’s aged care market through the acquisition of nursing homes, which has contributed to a diversified tenant base across 30 nursing home operators in 17 Japan prefectures.

This move is significant as the ageing population in Japan presents a long-term growth opportunity for the healthcare industry.

2. Raffles Medical Group

The healthcare industry is considered to be recession-resistant, much like consumer staples stocks, due to the essential nature of its services.

Raffles Medical Group (SGX: BSL), or RMG, is an example of a healthcare stock that investors may want to consider, given its resilience to economic slowdowns.

RMG is an integrated healthcare services provider with a presence in five Asian countries, spanning 14 cities.

The group operates three tertiary hospitals and over 100 clinics, offering a wide range of healthcare services.

RMG announced a 5.9% rise in its FY22 revenue, amounting to S$766.5 million, resulting in a significant 71.7% yoy increase in profit after tax (PAT), amounting to S$143.7 million.

This can be attributed to the easing of Covid-19 related protocols and the reopening of borders, which led to the return of foreign patients seeking medical treatment in Singapore during the second half of 2022.

Moving forward, RMG is optimistic about its financial performance for FY2023, as it expects the number of foreign patients to increase with the resumption of global travel.

This growth is likely to contribute to the Group’s continued profitability.

3. Haw Par Corp

Haw Par Corporation Ltd (SGX: H02), the maker of Tiger Balm, is a conglomerate with four core divisions – healthcare, leisure, property, and investments.

The Tiger Balm brand is globally recognised as one of the foremost topical analgesic brands, with distribution spanning across 100 countries.

Haw Par Corp reported a 29% increase in FY2022 revenue to S$182.1 million, of which S$164.1 million was contributed by its Healthcare business segment.

It noted that this was driven by global reopening and improvements in consumer spending on products in the Healthcare segment.

On a segmental basis, the Healthcare segment recorded a 31.8% increase in revenue, mainly driven by sales recovery in key Asian markets and lower marketing expenses incurred.

Revenue from other segments, which comprise of Leisure and Property divisions, increased 7.7% due to the return of international travellers.

Bright spots remain for healthcare sector

During the latest financial releases, many of the healthcare-related stocks are optimistic of their recovery and operational growth in 2023.

This is in line with the return of international travel as well as the transition to the post-pandemic normal.

Over the last two years, some of the healthcare-related stocks were affected by the COVID-19 pandemic but with the return to normalcy, this should benefit these stocks.

Aside from that, the healthcare sector is also resilient during a recession given that their products and services are essentials – regardless of the economic cycle.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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