Raffles Medical shares under siege!

Since 2008, the shares of home-grown healthcare provider, Raffles Medical Group, went on a rampage bull run, rising from $0.56 to almost $5.00 in 2015. The mighty surge in share price had created much wealth for many of its long-time investors. Recently, the shares came under siege and experienced a serious loss of form.

Against the above backdrop, several readers wrote in to discuss about the outlook for this SGX stock. In this article, I will share some of my views and insights on Raffles Medical.

“I like RMG but, like you, have resisted at prices say 1-2 months ago. It would be really valuable if you could share what you feel a fair value or target price might be?” – Georgie

“Wonderful article! Agree with your point of view on the soundness of Raffles Medical. With reference to your article, I have 2 questions.

1. Is there any particular reason or calculation that led you to the specific target price of $0.80 (or $0.60 in your previous article)? Assuming a similar profit, the PE ratio would be around 20, which is quite low for a healthcare stock, especially for RMG considering its stable growth.
2. Given that the overall global markets seem inflated, and may undergo a correction, would you recommend keeping RMG during the recession (as a defensive stock) or to pull out your investments altogether to hold in cash and bonds?” – Huang JH

My view on Raffles Medical

First of all, there is a difference between fair value and target price. And you need to figure this out because otherwise you would never appreciate Warren Buffett’s “price is what you pay, and value is what you get”.

Simply put, target price refers to the entry price that an investor set on a stock. On the other hand, fair value refers to the more objective way of valuing a company, taking into consideration the assets and liabilities.

Of course, both target price and fair value are fundamentally subjective as most investors have different target price and fair value for the same stock. In my opinion, the most objective way of valuing a company is looking at the book value – the Net Asset Value (NAV). But then again, nobody purchases a stock based solely on the book value. You would need to evaluate the profit and losses, cash flow, balance sheet, market share, business outlook and management performance.

Raffles Medical’s latest NAV is about $0.40 per share. If you factor in [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Read my articles on Raffles Medical below:

1. Raffles Medical share price
2. Raffles Medical Group’s Return on Equity (ROE)
3. Analysis on Raffles Medical Group
4. Raffles Medical shares power ahead
5. Raffles Medical Group stable growth
6. Raffles Medical Group’s proposed stock split

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