Right now Raffles Medical (BSL.SI / RAFG.SI) share price is at SGD$1.390

At this price, Raffles Medical is valued at price-to-book ratio of 2.850 and a trailing distribution yield of 1.439%

With the current valuation, would I invest in it?

Let’s go through it using my 7 steps guide and see how I pick the Best Singapore Dividend Stocks.

Disclaimer: Information should be used for entertainment purpose only. Full disclaimer below.

Stock Analysis - Raffles Medical - 5Y Share Price - Sep 2021

Raffles Medical (BSL.SI / RAFG.SI) 5 Year Chart

Year 2017 to 2021

As a quick recap, here are the 7 steps I use to pick the best Singapore Dividend Stocks.

  1. Debt to Equity Ratio
  2. Dividend Yield
  3. Dividend payout ratio
  4. EPS Growth Rate
  5. Return of Equity (ROE)
  6. Price-to-Book Ratio
  7. 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 offer 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 have medical facilities in these countries:

  • Singapore
  • China
  • Japan
  • Vietnam
  • Cambodia

Raffles Medical have 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
Raffles Hospital

DEBT TO EQUITY RATIO

Check for: Less than 0.5 D/E Ratio

Looking at the latest annual report for Year 2020.

Raffles Medical Group have a D/E ratio of 0.228.

This is lower than 0.5 D/E Ratio.

D/E ratio of less than 0.5 will means that the company is not overleverage.

With a D/E of approx. 0.2, 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:

Raffles Medical Group
Year 2016 2017 2018 2019 2020
Debt to Equity (D/E) Ratio 0.046 0.108 0.146 0.238 0.228

It seems to me that the D/E ratio is quite consistent and have been <0.5 for the past 5 years.

But it seems to have increase slightly in 2019 and 2020, which is probably due to the pandemic.

I will probably guess that, with the pandemic, it have negatively impacted the company to increase it’s ability to generate higher revenue and income.

But generally, the company have an low risk of the company defaulting.

My Opinion: Pass

Dividend Yield

Check for: More than 2.5% dividend yield

For Year 2020, Raffles Medical Group pay a dividend of SGD 0.02 which is about 1.44% in dividend yield.

This is lower than my target of 2.5%.

Looking at the distribution history, there is not much fluctuation in it’s dividend for the past 3 years.

Raffles Medical Group
Year 2016 2017 2018 2019 2020
Dividend (TTM) 0.05 0.02 0.023 0.025 0.025

For dividend stocks, I’ll prefer it to increase in it’s dividend distribution year-on-year.

The dividend yield is also much lower than the risk free rate (CPF OA Account) of 2.5%. I will give it a verdict of fail.

My Opinion: Fail

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 94.74% which is above my threshold of 80%.

We love to see payout ratio of less than 100%, because it will mean that the company is using it’s earnings to pay its shareholder in dividend.

But we will not want to buy into a company that have a dividend payout ratio of more than 80%, as it will seems to be risky.

The company may not have enough cash flow to weather the changes of the industry.

I personally think a payout ratio of more than 80% is way too high for a great dividend stock.

My Opinion: Fail

EPS Growth Rate

Check for: More than 10% EPS Growth

Earning Per Share (EPS) helps to analyze the profitability and quality of a stock. A negative growth rate of EPS will mean dilution of shareholder’s value, or the company is not doing well.

Here, we will like to see an EPS growth of 5 years or more.

Quick check on the 2020 annual report.

The EPS 5 year growth rate is -2.243%! Very Bad!

Yup, the EPS growth for Raffles Medical Group is negative!

This means, either the company is not doing well, or decisions made by the management have cause a dilution of the shareholder’s value.

The cause of the negative EPS growth rate is probably due to the pandemic.

My Opinion: Fail

High Return Of Equity (ROE)

Check for: More than 10% ROE

ROE is one of the most important ratio used by Warren Buffett.

Return of 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 7.574%.

A deep dive into the history shows that Raffles Medical Group shows that, it usually have an ROE of 7% to 10%.

Raffles Medical 2017 2018 2019 2020
Return on Equity (ROE) 10.1% 9.3% 7.3% 7.6%

ROE of around 7% is not too bad, but it is still below my requirement of 10% ROE.

My Opinion: Fail

PRICE-TO-BOOK RATIO

Check for: 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 it’s valuation (book value).

But due to the pandemic, it have impacted it’s business.

At the time of writing, the current P/B ratio of Raffles Medical Group is 2.850.

Meaning, it is trading at around 3 times its book value.

My Opinion: Fail

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 service to it’s patients.

But it does have a lot of competitors who are also in the space of private healthcare service.

List of Healthcare Services with 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 it’s quality of service as well as the quality of the healthcare.

According to Phil’s book Rule#1 investing, Raffles Medical Group have the “Brand MOAT”.

Brand MOAT, can be an attractive MOAT, especially in the space where life and death matters. It allows you to price your product higher than your competitors while still 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 have a final score of 3/10.

With a high dividend payout ratio, negative EPS growth rate, and a weak MOAT, I don’t think this will be a good dividend stock for me to buy.

Personally, I think the pandemic will continue impacting the company for the near foreseeable future as the pandemic rages on in the South East Asia region.

Below is how I’ve scored Raffles Medical Group.

My Raffles Medical Group’s Score Card as a Dividend Stock
Metrics Weightage Score
Debt to Equity Ratio High (2) 2
Dividend Yield Low (1) 0
Dividend payout ratio Low (1) 0
EPS Growth Rate Low (1) 0
High Return of Equity (ROE) Low (1) 0
Acceptable Price-to-Book Ratio High (2) 0
MOAT High (2) 1
Total 3

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 on Risk Management

This translate to the following 3 metrics I have in my list:

Thus, for these metrics, I will put a higher weightage in my scoring.

Question.

Would you invest in Raffles Medical?

Disclaimer/ Disclosure: I may or may not own some of these stock that is written in my website. I am NOT a Financial Advisor or a Lawyer. The content on this site, or YouTube channel, or any other sources are for educational purpose only. I merely cite my own personnel opinion and is not intended to be personalized investment advice. ​What I've written here is part of my online diary on my investing journey. The information might be wrong and inaccurate. You must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. I will not be liable for any loss you've make. You should always do your own due diligence and consider your financial goals before investing in any stock.

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