The crisis isn’t over yet — but this Singapore stock is profiting from it.
Raffles Medical Group (SGX:BSL) is a S$2.9 billion healthcare operator. Today, Raffles Medical owns more than 106 hospitals, clinics and specialist centres — across Singapore, China, Vietnam and Cambodia.
Raffles Medical has somewhat a gift of “capital-efficiency”.
What I mean is Raffles Medical produces a high returns on their shareholders’ equity (ROE). These returns don’t need large, ongoing capital investments to maintain the business.
Instead, Raffles Medical deploys excess capital to grow its business — adding more hospitals beyond Singapore.
Now, don’t let the term: return on shareholders’ equity scare you. It’s a simple concept.
Shareholders’ equity measures the amount of investors’ capital used by the company. To calculate this: you need to look at the total equity of the company and subtract all intangible and goodwill assets.
Then, to find ROE: take the profits earned divide by total shareholders’ equity.

Source: Raffles Medical Group Annual Report 2020, Dividend Titan
Last year, Raffles Medical produced net profits of S$67 million, that gives it an ROE of 7.3% in 2020.
What this Singapore Stock Has That Other Singapore Stocks Lack
Over the past 10 years, Raffles Medical produced an average ROE of 12%. For Singapore companies, an ROE that’s higher than 10% is pretty good.
You can see how capital-efficient businesses like Raffles Medical affect its shares.
5 years ago, Raffles Medical had a peak market cap of S$2 billion in 2016. Between 2011 and 2015, it poured in S$76 million of capital.
In 2016, the company produced S$474 million of revenues, 80% gross margins and S$70 million of net profits.
Sometimes, the market doesn’t value Raffles Medical’s gift of “capital-efficiency”.
The company doubled its capital investments over the last few years. Because it wasn’t getting as much returns from its investments, shares fell to as low as S$0.77 per share.
Today, the company has more than doubled since October last year.



Source: ShareInvestor Webpro, Dividend Titan
The thing is, healthcare is a service people are willing to pay, no matter the cost.
Whether you’re visiting a GP, or need an emergency surgery, people will never ask for a discount. Raffles Medical has a lot of pricing power.
Giving its business the “capital-efficiency” status.
Why Raffles Medical Reported Strong 1H2021 Results
Raffles Medical’s revenues doubled from 2011 to 2020 to S$568 million. And it produces an average 80% gross profit margins.
In its latest first half 2021 results, Raffles Medical generated 42% more revenues and 138% more net profits for the period.
This is one of the few companies that continues to do well during the COVID pandemic.
Raffles Medical it actively worked with Singapore’s Ministry of Health to design and build vaccination centres. Within 5 days, Raffles Medical helped set up a vaccination centre at Changi Terminal 4.
Raffles Medical grew its operations beyond “air-border screening” and “pre-event testing”.
It now includes vaccination centres, pre-departure swabbing and dedicated polymerase chain reaction (PCR) testing centres.
Raffles Medical’s historical dividend yield is low. But it continued to grow dividends year after year. In fact, this capital-efficient company grew dividends from 1.16 cents per share in 2011 to 2.5 cents per share in 2020.
Today, Raffles Medical’s dividend yield trades at a low 1.6%.



Source: Raffles Medical Group website
Don’t forget, Raffles Medical continues to reinvest its earnings into the business, so I’d expect its shares to climb faster than its rate of dividend growth.
With its China business starting to see recovery, I won’t be surprised Raffles Medical will continue to do well in the future.
Sometimes investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
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