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Can Raffles Medical share price ever rock again?

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From a high of $1.50 in 2016, Raffles Medical share price plunged to a low of $0.99 on 6 July 2018. What a horror ride! Previously in 2017, I have written a few articles highlighting that the time was not ripe to invest in Raffles Medical shares. Also, I had set a personal entry level between $0.60 to $0.80 for Raffles Medical share price, which many investors scoffed at.

Can the embattled Raffles Medical share price rise from the ashes like a phoenix or should investors run for their lives before the Raffles Medical share price got bombed out again?

Raffles Medical share price in limbo?

My views had, at that point of time, touched on many readers’ raw nerves and might have riled many investors. There are also quite a number of readers who dismissed my strategy and claimed that my valuation of Raffles Medical share price was flawed. But I guess the performance of Raffles Medical share price in the past two years vindicated my viewpoints.

Those who had bought at the high side of $1.50 would be staring at massive paper losses now. Of course there is no point in crying over spilled milk but there are important lessons to be learned for those who suffered losses from this counter.

The intriguing meltdown of Raffles Medical share price is indeed puzzling because it happened against the backdrop of increasing revenue and net profits in recent years. However, the plunge in Raffles Medical share price could be attributed to falling Return-on-Equity (ROE), which had plummeted from 13.4 in FY2014 to a dismal 9.6 in FY2017. Why is ROE a key factor in the movement of Raffles Medical share price, if you may ask? Read on if you are interested to know whether Raffles Medical is a value trap or potential multi-bagger.

Raffles Medical share price

On looking back, Raffles Medical share price had a massive bull run from 2008 to 2015. That was a period which corresponded with a bed crunch in public hospitals and investors bought into Raffles Medical share price, thinking that the healthcare industry is an evergreen sector that will always be in demand. While such thinking is not wrong, there are many factors that can affect the movement of share price. In view of this, it is important to understand the context and set a strategy of entry and exit levels to make money out of Raffles Medical share price volatility.

Reason for the meltdown

Notwithstanding the above, Raffles Medical is actually a good stock to buy and hold for price appreciation. The trick is determining the sensible price level to enter. Fundamentally, this counter is not a dividend play as the dividend yield is terribly low. With current Raffles Medical share price of $1.09, the dividend yield is 2.06%. At this kind of valuation, investors are better off buying Singapore Savings Bonds than investing in Raffles Medical stock.

But from the growth perspective, management has done a good job in growing the company through various initiatives over the years, such as Raffles Holland V, acquisition of International SOS in 2015 and its overseas expansion projects in China. Total revenue had actually surged from $374 million in FY2014 to $477 million in FY2017. Correspondingly, net income grew from $67million to $70 million in the same period.

Perhaps a victim of its own success, Raffles Medical had over the years retained increasing amount of earnings. Retained earnings [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.]

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Updated: September 5, 2018 — 7:53 am

3 Comments

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  1. Thanks for the analysis.

    Got some at 1.1, and planned to get some more at 1.0, but failed to do so as no close monitoring.

  2. Hi Leo,

    I don’t know if the slide in share price will continue but this counter looks kinda bearish. Somehow, after news of medical tourism broke out in 2016, Raffles Medical shares got bombed out. But I do think that recovery could be in sight in the next few years with the growth initiatives. Enjoy the ride!

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

  3. Thanks for your comment, Gerald. Guess it will be lingering at the $1.0± level for a long period. Eye on it patiently for recovery.

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