Healthcare

Healthcare: SGX-listed healthcare companies have largely reported improved financial performance during the recent 2Q14 results season. Raffles Medical Group’s (RMG) earnings met OCBC’s expectations but Biosensors fell short. OCBC believes secular trends such as an aging population and better health awareness will underpin demand for higher quality healthcare services and products. Healthcare companies have thus continued their expansion plans to leverage on this positive long-term outlook. Notwithstanding the robust secular fundamentals, OCBC sees near term risk. The FTSE ST Health Care Index is now trading at a blended forward P/E of 21.9x, which is close to 1.3x SD above its mean 5-year forward P/E. OCBC believes valuations are now rich, and downgrades the healthcare sector to Neutral. Our preferred pick within the sector is still RMG [Hold; TP $3.90], and thinks a better entry point for the stock would be below S$3.60.