If you are looking for stability and resilience, you might want to check out these industries.
Education, health care and financial technology have held up well to last year’s downturn.
Healthcare, in particular, is emerging as a “recession-resistant” sector.
Most people won’t skimp on health expenses.
For this reason, healthcare is viewed as a non-discretionary expense that tends to hold up well during tough times.
Not all health stocks are attractive, however.
It’s important to look for attributes like a strong competitive divide, quality assets, a long track record, and a stellar dividend payment history.
Here are two healthcare stocks you can consider adding to your investment watchlist.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT owns a portfolio of 53 healthcare and healthcare-related assets with a portfolio size of S $ 1.99 billion as of March 31, 2021.
Its portfolio consists of three private hospitals in Singapore as well as 49 private retirement homes in Japan.
Parkway Life REIT also has lots titrated by strata in a specialized clinic in Kuala Lumpur, Malaysia.
The REIT has reported a continuous increase in its gross income and net property income (NPI) despite difficult economic conditions.
For its first quarter of fiscal 2021 (1Q2021), gross revenue increased 0.4% year-on-year to S $ 30 million, while NPI increased 1% year-on-year for reach S $ 28 million.
Distribution per unit (DPU) increased 7.4% year-on-year to S $ 0.0357, bringing the annualized DPU to S $ 0.1428.
At the last traded price of S $ 4.39, the units of the REIT offer a potential dividend yield of 3.3%.
Parkway Life REIT has seen uninterrupted DPU growth since its IPO in 2007, underscoring the resilience of its healthcare asset portfolio.
The DPU started at S $ 0.0683 in fiscal 2008 and more than doubled to reach S $ 0.1379 in fiscal 2020.
Its Singapore hospital properties contribute around 60% of gross income, with the main tenant being IHH Healthcare Berhad (SGX: Q0F), an international healthcare operator with 80 hospitals in 10 countries.
These properties are subject to a triple net lease, which means that the REIT is not responsible for all expenses associated with the property.
In addition, the leases have a favorable rent revision structure which is linked to the consumer price index (CPI) increased by 1%, guaranteeing growth of at least 1% year on year. of the minimum rent.
Meanwhile, most of the REIT’s Japanese properties also incorporate an “up-only” rent review mechanism.
Under this arrangement, if the CPI is negative, the rent will remain unchanged.
The manager of the REIT has been active in capital recycling for Parkway Life REIT.
In January of this year, the REIT sold a non-core building in Japan for S $ 37.1 million, 12% more than its original purchase price, generating a gain on disposal of $ 5.1 million. Singaporeans.
In December of last year, the REIT acquired another nursing home in Tokyo for S $ 21.2 million.
Raffles Medical Group Ltd (SGX: BSL)
Raffles Medical Group Ltd, or RMG, is an integrated private healthcare provider that offers a range of primary and tertiary care services.
The group operates a network of three hospitals and over 100 multidisciplinary clinics and employs over 2,700 employees.
RMG released a solid set of financial figures despite setbacks in the first half of 2020.
For its fiscal year 2020 (FY2020), revenue increased 8.8% year-on-year to S $ 568.2 million, thanks to the government’s national plans in the fight against COVID-19.
Operating profit jumped 16.1% year-on-year to S $ 88.4 million while net profit rose 9.3% year-on-year to S $ 65.9 million.
The group provided new services such as polymerase chain reaction (PCR) and serological testing and increased its flexible workforce by 1,300 people during the year.
As of December 31, 2020, RMG had cash balances of S $ 202.1 million and generated free cash flow of S $ 73.1 million.
In line with the good results, the group declared a final dividend of S $ 0.02, bringing the dividend for fiscal 2020 to S $ 0.025. Shares of the healthcare operator offer a sliding dividend yield of around 2.2%.
The group’s first hospital in China, located in Chongqing, sees an improvement in the number of patients year on year.
Construction of the Raffles Hospital in Shanghai is nearing completion, and the new hospital is preparing to receive patients in the second quarter of 2021.
RMG continues to grow with the announcement of a strategic partnership with China Life Healthcare, a subsidiary of Life insurance in China (SHA: 601628).
The two sides signed a memorandum of understanding to explore collaborations and initiatives in areas such as healthcare management, training and medical service delivery.
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Disclaimer: Royston Yang owns shares of Raffles Medical Group.
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