Is Raffles Medical a Good Stock to Buy now? (SGX: BSL / RAFG.SI)
Disclaimer: I may or may not have invest in any of them, what’s listed here is only for entertainment purpose only and it should never be used as any form of investment advice. This is my diary on my stock analysis, while I’ve been investing for +15 years, I am still learning. I wish to share what I learn during my investment journey so you may learn from both my success and mistakes. Enjoy!
Right now Raffles Medical’s (BSL.SI / RAFG.SI) share price is at SGD$1.050
At this price, Raffles Medical is valued at a price-to-book ratio of 1.955 and a trailing distribution of $0.038 SGD per share.
With the current valuation, would I invest in it?
Let’s go through it using my 7 steps guide to get started investing in Singapore and find the best dividend stocks.
- Debt to Equity Ratio
- Dividend Yield
- Dividend payout ratio
- EPS Growth Rate
- Return of Equity (ROE)
- Price-to-Book Ratio
- Economic MOAT
Business Background
Raffles Medical Group was founded in 1976 and is based in Singapore. It is a leading integrated private healthcare provider primary in Singapore. Raffles Hospital, the flagship of Raffles Medical Group, is a private hospital located that offers a wide range of specialist medical and diagnostic services with more than 30 disciplines for both inpatients and outpatients.
Raffles Medical Group is also the first Asian member of the Mayo Clinic Care Network
Raffles Medical has medical facilities in these countries:
- Singapore
- China
- Japan
- Vietnam
- Cambodia
Raffles Medical has representative offices in these countries:
- Indonesia
- Vietnam
- Cambodia
- Brunei
- Bangladesh
- Russian Far East
- Asia-Pacific region
Service provided
- Raffles Medical
- Raffles Hospital
- Raffles Dental
- Raffles Health Insurance
1. Debt To Equity Ratio (D/E)
Check for: Less than 0.5 D/E Ratio
Looking at the latest annual report.
Raffles Medical Group have a D/E ratio of 0.095.
This is lower than the 0.5 D/E Ratio.
A D/E ratio of less than 0.5 will means that the company is not overleverage.
With a D/E of approx. 0.1, I think it is pretty healthy.
To understand this stock batter, I’ve done a quick look at the past Debt to Equity Ratio for Raffles Medical:
| Year | Debt to Equity (D/E) Ratio |
|---|---|
| 2024 | Pending |
| 2023 | 0.076 |
| 2022 | 0.095 |
| 2021 | 0.190 |
| 2020 | 0.228 |
| 2019 | 0.238 |
| 2018 | 0.108 |
It seems to me that the D/E ratio is quite consistent and has been <0.5 for the past 5 years.
But it seems to have increased slightly from 2018 to 2020, which is probably due to the pandemic.
Subsequently from 2021 to 2023, the D/E have decreased
I will probably guess that the pandemic, has negatively impacted the company to increase its ability to generate higher revenue and income.
But as we are in post-pandemic, the D/E ratio recovers.
But generally, the company has a low risk of the company defaulting.
My Opinion: Pass
2. Dividend Yield
Check for: More than a 2.5% dividend yield
Raffles Medical Group pays a dividend of SGD 0.038 which is about 3.55% in dividend yield.
This is higher than my target of 2.5%.
Looking at the distribution history, there is not much fluctuation in its dividend for the past few years.
| Year | Dividend (TTM) SGD |
|---|---|
| 2024 | Pending |
| 2023 | 0.038 |
| 2022 | 0.028 |
| 2021 | 0.02 |
| 2020 | 0.025 |
| 2019 | 0.025 |
| 2018 | 0.023 |
For dividend stocks, I’ll prefer to increase their dividend distribution year-on-year.
With the recovery on the dividend in the year 2022 and 2023.
The dividend yield is also higher than the risk-free rate (CPF OA Account) of 2.5%. I will give it a verdict of pass.
My Opinion: Pass
3. Dividend Payout Ratio
Check for: Less than 80% dividend payout ratio
At the time of writing, a quick check using some of my favorite online stocks info tools shows that the dividend payout ratio for Raffles Medical Group is 49.35% which is below my threshold of 80%.
We love to see a payout ratio of less than 100% because it will mean that the company is using its earnings to pay its shareholder dividend.
I personally think a payout ratio of less than 50% is an indication of a great dividend stock.
My Opinion: Pass
4. EPS Growth Rate
Check for: More than 10% EPS Growth
Here, we will like to see an EPS growth of 5 years or more.
A quick check on its financial data online.
The EPS 5 year growth rate is 13.983%.
Yup, the EPS growth for Raffles Medical Group is pretty good!
This means, either the company is doing well, or decisions made by the management is adding value to the shareholder’s value.
The increase in EPS growth rate is probably due to the recovery from the pandemic.
My Opinion: Pass
5. High Return Of Equity (ROE)
Check for: More than 10% ROE
ROE is one of the most important ratios used by Warren Buffett.
Return on Equity is used to measure the management’s ability to make a return on our investment.
At the time of writing, the ROE of Raffles Medical Group have an ROE of 14.78%.
A deep dive into the history shows that Raffles Medical Group shows that, it usually has an ROE of 7% to 10%.
| Year | Return on Equity (ROE) |
|---|---|
| 2024 | Pending |
| 2023 | 14.8% |
| 2022 | 9.1% |
| 2021 | 8.9% |
| 2020 | 7.6% |
| 2019 | 7.3% |
| 2018 | 9.3% |
ROE of more than 10% is not too bad, but it is above my requirement of 10% ROE.
My Opinion: Pass
6. Price-To-Book Ratio (P/B)
Check for: a P/B Ratio of less than 1.8
Raffles Medical Group is one of the biggest players in private healthcare.
With so much attention on Raffles Medical, the price of the stock will most likely be traded above its valuation (book value).
But the pandemic has impacted its business.
At the time of writing, the current P/B ratio of Raffles Medical Group is 1.955.
Meaning, it is trading at around 2 times its book value.
My Opinion: Fail
7. Economic MOAT
Check for: Not just having a MOAT, but a great MOAT
Raffles Medical Group is the leading private healthcare service provider in Singapore.
Raffles Medical Group provides world-class healthcare services to its patients.
But it does have a lot of competitors who are also in the space of private healthcare services.
List of Healthcare Services with a Market Cap Above $100 Million:
- Healthway Med (HEMC.SI)
- ISEC (ISEC.SI)
- Medtecs Intl (MTCS.SI)
- OUE Lippo HC (OUEL.SI)
- Q&M Dental (QMDT.SI)
- Raffles Medical (RAFG.SI)
- Riverstone (RVHL.SI)
- Singapore O&G (SINP.SI)
- SingMedical (SMGL.SI)
- TalkMed (TALK.SI)
- Thomson Medical (THOS.SI)
- UGHealthcare (UGHE.SI)
- Vicplas Intl (VICP.SI)
Nonetheless, Raffles Medical Group is known for its quality of service as well as the quality of healthcare.
According to Phil’s book Rule#1 investing, Raffles Medical Group has the “Brand MOAT”.
Brand MOAT can be an attractive MOAT, especially in a space where life and death matter. It allows you to price your product higher than your competitors while still being able to win the business.
But in my opinion, Raffles Medical Group’s Brand MOAT is not strong.
My Opinion: Partially Pass
Overall
Raffles Medical Group has a final score of 7/10.
With a good EPS growth rate, I see a lot of potential for the stocks. But we need to consider it’s weak MOAT when deciding if it is a good buy.
Personally, I think we can KIV this stock.
Below is how I’ve scored Raffles Medical Group.
| Metrics | Weightage | Score |
|---|---|---|
| Debt to Equity Ratio | High (2) | 2 |
| Dividend Yield | Low (1) | 1 |
| Dividend payout ratio | Low (1) | 1 |
| EPS Growth Rate | Low (1) | 1 |
| High Return of Equity (ROE) | Low (1) | 1 |
| Acceptable Price-to-Book Ratio | Low (1) | 0 |
| MOAT | Very High (3) | 1 |
| Total | NA | 7 |
Why do I find some metrics more important than others?
There are 3 attributes in a company that Warren Buffett wants in particular:
- Wonderful Company at Fair Price
- Stable & Understandable Business
- Vigilant Leadership in Risk Management
This translate to the following 3 metrics I have on my list:
Thus, for these metrics, I will put a higher weightage on my scoring.
Question.
Would you invest in Raffles Medical?
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Antony C. is a dividend investor with over 15+ years of investing experience. He’s also the book author of “Start Small, Dream Big“, certified PMP® holder and founder of IncomeBuddies.com (IB). At IB, he share his personal journey and expertise on growing passive income through dividend investing and building online business. Antony has been featured in global news outlet including Yahoo Finance, Nasdaq and Non Fiction Author Association (NFAA).
